peering charges?

Would you please describe any useful mechanism of traffic-based
inter-backbone settelemts?

Computers (third party?) on the edges of my network count the number of
packets that transit my network over a certain time period. Periodically I
issue invoices.

Ok. How do you translate the number of packets into figure in $s?

In a capitalist economy, price generally follows value.

What is the value of a packet? It is not even clear if packet crossing
from your network to my network gives _me_ any value. It can as well
be for _your_ benefit.

Since there's no way to determine value, the scheme is thus completely
arbitrary; and therefore _is_ regressive. Economics 101.

Of course, other networks do the same. End users
(including co-located computers) simply appear as connected networks that
don't provide any transit, hence they pay for their connection.

They do it today. Where's the difference?

You seem to forget that carrying traffic is only a part of network
service; in fact, a lot of _value_ is in the _ability_ to communicate
universally. That's what made Internet a killer to all those X.25
networks.

Because there is a real cost for long-haul packet transport.

Remember that I said "if the same amount of packets are transfered". The
speed of my connection does not necessarily affect the number of packets
that I'm transmitting.

When you lease an apartment landlord doesn't generally care if
you don't sleep there six days out of seven.

That's because he has (implied) obligation to provide adequate
service during peak usage.

"Connection costs" is rent on transmission facilities, plus
overhead (upkeep of the property, insurance, administration, etc).

No. That's "transmission cost", not "connection cost". The cost of me
connecting to your network (not counting setup and so on) is the sum of
the interface electronics on both ends and whatever link we need
inbetween.

Connection costs are generally figured into non-recurring charges.
They usually do not exceed costs of equipment and overhead.

Off on a tangent... creating bandwidth is somewhat like making computer
chips. Making the first production Pentium (or whatever) processor costs
billions. The second is a few cents. Here, laying the cable is expensive.
Once it is in the ground, the cost for transporting another packet is
almost zero.

This is an example of patently meaningless analogy. _Every_ business
(even pyramid scams) has some capital costs. So what.

Telcos lend money, put in fiber and than pay loans off from the
resulting revenues. They can borrow capital internally, from their
shareholders (in form of reduced dividends).

The fact that tfiber is not loaded 100% all the time is figured in
the user fees.

An interesting question is what do to with potential bandwidth/cpu
cycles/free ram, i.e. what are the costs of not using available capacity?
One answer is that the cost is zero until your competitor starts being
more efficient then you are. See Soviet UNION vs USA.

There's no secret that the name of the game in the Internet backbones
is "shove congestion back to competitor's backbone".

Back to networks... it would be logical to assume that whenever people
deploy fiber they drop as much as they can afford at that moment.

You will be surprised. Sprint has 6 (six) strands of fiber in its
trunks. The cost of putting in 100 strands was purely incremental,
but then, some beancounters figured that those six strands will be
good forever. Now, it's digging time again.

If that's true then there must be enourmous amounts of unlit fiber.

In some places. Generally, LDCs are out of capacity.

What's
the total capacity going accross the atlantic or pacific?

Not much. It's not like surface cables, where the real cost is
digging a tranche, and buying rights of way. It costs next to
nothing to drop undersea cable off the ship; but the cable itself
with all its hamstrung amplifiers costs a fortune.

How much of it is being used?

Practically all of it. BTW, it is generally priced in DS-0 chunks;
i.e. when you get a DS-1, you pay the same as for 24 DS-0s.

I'd bet that there are many terabits of fiber that are not in use.

Not at all.

The worst part of it, you can't just install WDM equipment at the
ends, and get more capacity. Replacement of amplifiers in the
existing undersea cable is about as costly as putting in new cable.

Yes, of course, the closer you get to what's technologically feasable,
(the closer you move to the border to the future) the more expensive
things become. I guess that's the main argument used to defend higher
costs for faster connections.

Never underestimate bandwidth of 10 sq feet of fiber strands.

But we don't even need to go to that edge. Building gigabit, if not
terrabit routers is amazingly simple and can be done with off the shelf
technology.

Tell me about it.

Hey, a few Linux boxes interconnected with a few 100MB/sec
ethernet switches in the right fashion would allow the creation of a super
NAP that should outperform gigaswitches easily.

Not _that_ simple. I won't go into details on that; but so far the
only known way to do that is pretty much covered by the pending patents.

Summary: I would not be surprised if the packet carrying capacity of the
Internet could be increased by two or three orders of magnitude with
surprisingly little investments. The real challenge is how to get people
to do that.

Four orders. Then something different is needed.

--vadim

Ok. How do you translate the number of packets into figure in $s?

Lower limit would be total cost of me running my network divided by the
number of packets transitting it plus my desired return on investment.
Note how my lower limit changes with the usage of my network! Upper limit
would be how much my competitor is charging for the same thing since
meaningfull differentiation of IP transport is hard if not impossible.

What is the value of a packet? It is not even clear if packet crossing
from your network to my network gives _me_ any value. It can as well
be for _your_ benefit.

Nah, you originated the packet for reasons unknown to me. It transits my
network which is what I charge for. There is no need to determine the
value of that packet in an economic sense. You don't have to use my
network, but I can put a price on it if you do.

In a capitalist economy, price generally follows value.

Scarcity creates value, hence the desire to differentiate.

However, my willingness to pay your network for transit directly depends
on the number of people that I can reach only (or better in some fashion,
including cheaper) through your network.

You seem to forget that carrying traffic is only a part of network
service; in fact, a lot of _value_ is in the _ability_ to communicate
universally. That's what made Internet a killer to all those X.25
networks.

Well, you have a point in there being value in the _ability_ to
communicate. That's why I'm willing to pay a limited entry fee of some
sort, i.e. buy a computer and connect to you in the first place.

Once I'm connected, however, transitting traffic through your network is
the only thing that I'm interested in. Why else would I want to connect to
your network? Of course, my desire to connect to you and my willingness to
pay you for transit increases with the number of people that I can reach
only or, if multi-connected, better in some fashion through your network.

That's because he has (implied) obligation to provide adequate
service during peak usage.

Peak usage? I wonder how usefull that concept is when it comes to packet
networks.

An simplified example. Lets say I have a direct T1 between A and B. A
starts to transfer 4 GBytes from B to A and uses 100% of the bandwidth.
Then B starts another transfer of 4GBytes from A to B. Both now use 50% of
the bandwidth and each transfer takes twice as long.

I can still telnet between the two locations, even play quake - the load
is hardly noticable for short transfers.

> "Connection costs" is rent on transmission facilities, plus
> overhead (upkeep of the property, insurance, administration, etc).

>No. That's "transmission cost", not "connection cost". The cost of me
>connecting to your network (not counting setup and so on) is the sum of
>the interface electronics on both ends and whatever link we need
>inbetween.

Connection costs are generally figured into non-recurring charges.
They usually do not exceed costs of equipment and overhead.

That was my point. Why charge a higher _recurring_ fee for a faster
connection?

>Off on a tangent... creating bandwidth is somewhat like making computer
>chips. Making the first production Pentium (or whatever) processor costs
>billions. The second is a few cents. Here, laying the cable is expensive.
>Once it is in the ground, the cost for transporting another packet is
>almost zero.

This is an example of patently meaningless analogy. _Every_ business
(even pyramid scams) has some capital costs. So what.

Why meaningless? There's no way to get the money back out once the cable
is in the ground or the chip is being fabricated.

>Back to networks... it would be logical to assume that whenever people
>deploy fiber they drop as much as they can afford at that moment.

You will be surprised. Sprint has 6 (six) strands of fiber in its
trunks. The cost of putting in 100 strands was purely incremental,
but then, some beancounters figured that those six strands will be
good forever. Now, it's digging time again.

How do you know?

>How much of it is being used?

Practically all of it. BTW, it is generally priced in DS-0 chunks;
i.e. when you get a DS-1, you pay the same as for 24 DS-0s.

That pricing model is the problem. You are asked to pay for the potential
of transporting data, not for transporting data. Circuit switching's
heritage. Packet networks need a different pricing model.

>Hey, a few Linux boxes interconnected with a few 100MB/sec
>ethernet switches in the right fashion would allow the creation of a super
>NAP that should outperform gigaswitches easily.

Not _that_ simple. I won't go into details on that; but so far the
only known way to do that is pretty much covered by the pending patents.

Well, the key is some sort of any-to-any communication matrix for n
routers. If n is small, even ethernet switches will do.

>Summary: I would not be surprised if the packet carrying capacity of the
>Internet could be increased by two or three orders of magnitude with
>surprisingly little investments. The real challenge is how to get people
>to do that.

Four orders. Then something different is needed.

Hey, agreement...

Dirk

An simplified example. Lets say I have a direct T1 between A and B. A
starts to transfer 4 GBytes from B to A and uses 100% of the bandwidth.
Then B starts another transfer of 4GBytes from A to B. Both now use 50% of
the bandwidth and each transfer takes twice as long.

I can still telnet between the two locations, even play quake - the load
is hardly noticable for short transfers.

Since a T-1 is symmetric, wouldn't the transfer take approximately the
same time whether A to B or B to A are both or individually transfering
files (as long as they are going opposite directions??) So does the cost
per byte get cut in half even though the price charged may stay the same
? If ROI is calculated on a 1-way model [ignoring ACKs] they with full
duplex utilization ROI = PRICE - COST; ROI'=ROI+PRICE for full duplex
operation.

That was my point. Why charge a higher _recurring_ fee for a faster
connection?

Because (usually) there is a higher recurring potential traffic load from
your site. What if you run one of the big Olympic or Superbowl web sites?
And you get charged $1000 per month whether you have a 155Mbit connection
or a 56Kbaud connection. Two months out of the year you could fill it,
and the other 10 do nothing but send some email. The network you connect
to has to be engineered for those peaks or they are not doing their job
[IMO].

Granted, we usually talk about mid day peaks, etc, but what about
convention halls that might keep a T3 or two around for big trade shows
and only *really* use them on the weekends or weeknights or something.
Their total (average, or even byte) traffic might not be that
significant, but their bursts could be wildly high.

-Deepak.

An simplified example. Lets say I have a direct T1 between A and B. A
starts to transfer 4 GBytes from B to A and uses 100% of the bandwidth.
Then B starts another transfer of 4GBytes from A to B. Both now use 50% of
the bandwidth and each transfer takes twice as long.

T1's are bidirectional. Only the ACK's slow down the transfer a tiny bit.

That pricing model is the problem. You are asked to pay for the potential
of transporting data, not for transporting data. Circuit switching's
heritage. Packet networks need a different pricing model.

I think the success of the global Internet shows that packet networks
don't need a different pricing model. The pricing model is part of the
reason for their success.

Michael Dillon - Internet & ISP Consulting
Memra Software Inc. - Fax: +1-250-546-3049
http://www.memra.com - E-mail: michael@memra.com

Exactly. Current telco pricing (and engineering) focusses on _potential_
to transfer data. Like I said, this makes sense for circuit switched
networks. The problem is that e are now dealing with packet networks.
where there is little to no cost in having a wire plugged into your
network that is not transferring packets

In other words, applying circuit switching based thinking to data networks
creates the wrong incentives for network operators since it may be cheaper
to fire the top ten users of my network rather then increasing capacity.
If you count bytes transitting your network then the incentive is to
increase capacity.

Dirk