A Practical Navigator for the Internet Economy

Part one of a double issue on VoIP in the context of new developments in Spectrum Policy Reform and P2P

The Enterprise Prepares to Leave the PSTN:

Find out how to order single copy ($270) or group license ($540) for just the January February 2003 issue.

Contents:

VoIP, Wireless, and P2P Erode Local Loop

Enterprises Begin Migration from PSTN as VoIP Both Matures Outside of Enterprise and Collides with International Tariffs

We Review Wide Range of VoIP Economic & Technical Issues as FCC Chairman Powell Embraces Spectrum Reform pp. 1 - 14

Contents of Complete Jan - Feb issue

Introduction

This issue of the COOK Report begins a two part exploration of the hollowing out of the PSTN by Voice over IP.

Voice over IP (VoIP) over the past year, has truly come of age. Our interview with Richard Shockey and the follow up discussion with a group of experts show how increasingly large parts of enterprise voice telephony is migrating from the public switched telephone network to the Internet. While many LECs and carriers are themselves jumping on the voice over IP bandwagon in ways that are discussed below, the economic dilemmas that are facing the telcos are such that this action is unlikely to save them from the economic consequences of enterprise economic desertion and the rise of user-owned, asset-based networks.

The Three Roads to Fail Fast

Meanwhile, in this introductory essay, we shall look at the ongoing evolution of the economic and policy climate affecting the industry. The rest of the issue will examination how VoIP will bleed the phone companies. The bleeding will be mainly but not entirely at the level of the LECs due to enterprise adoption of VoIP. Carriers are also being hard hit by black and grey market VoIP disruption of international tariffs. The introduction to the January issue examines how progress in wireless and peer-to-peer infrastructure will each make their own additional contribution to the PSTN blood letting. If we head full stream ahead on all three: VoIP, wireless and peer-to-peer, it is conceivable that the fail fast scenario outlined at http://netparadox.com could come to pass. But it won't happen without a struggle.

In an edge-controlled Internet shoring up the position of the incumbent telcos will never be easy. The pity is that the dominant political climate and ideology within the United States gives them every reason to try and try. They are fixated on the creation of industrial age re-incarnations of content laden wall-gardens. Determined to control the uncontrollable, they claim to be acting in the name of the free market and private interest. Their rear guard action is helping to keep the industry flat on the back while, at a national level, we begin to devour the very seed corn of the industry we created.

Snip.

The First Road: A Wireless Revolution at the FCC?

But suddenly and almost inexplicably, a revolution of major importance may have just come to a head at the FCC.

Snip.

Powell in a remarkable October 30, 2002 speech found at http://www.fcc.gov/Speeches/Powell/2002/spmkp212.html has made the shift into the new wireless paradigm. More about what he said in a text box below. But first, what happened? As the industry tanked last year and this, Commission Chair Powell girded his loins and asserted again and again that there was no need to worry. It was just the free market producing consolidation and cleaning up the mistakes of a period of exuberant over investment in fiber. When WorldCom collapsed due to the now-infamous accounting scandal, Powell replied that, if need be, it could be acquired by a LEC.

The hands-off republican attitude and enormous complexity of the colliding tectonic plates of the old and new forms of telecom caught the FCC unprepared for the storm that struck this year. Consider some of the conflicting forces. The 1996 reform act - which came to be seen by some as bringing on the debacle - required the delivery of ubiquitous broadband. By this year ubiquitous broadband plainly wasn't going to happen via the ILECs - the subterfuge of Tauzin-Dingel not withstanding. Then unprecedented telco failures struck while do-it-yourself Wi-Fi with Pringles can antennas took off. Whether the Pringles cans worked well or not, they caught the public's imagination. Hundreds of companies brought out devices with prices falling from thousands in 1999 to under $100 by 2002. And the ability of these radios to operate in the presence of other radios without significant interference called into question a perceived spectrum shortage in which companies operating under the old spectrum paradigms spent billions for licenses and found, more often than not, themselves with no money left for a rollout of what they had paid so much for licensed permission to deliver. And in the ensuing fracas we are seeing that Congress is becoming ready to interfere with its own laws regardless of technology.

Snip

An End Run?

The Spectrum Policy Task Force seems to have gotten results because it was executed quite outside normal FCC channels. A normal Notice of Inquiry (NOI) requires the Commission itself to kick it off. But, even if one assumes that the political, economic and procedural implications underlying all this would not have derailed any action, the commissioners lacked the necessary technical understanding to initiate an NOI.

Dave Hughes has written a worthwhile analysis: "In the face of all kinds of spectrum 'scarcity' pressure (scarcity created as much by the way technical rules were made as by the laws of physics) Powell started learning - from Hatfield [and from Kolodzy - Editor]. Powell was a damned lawyer (and I have yet to meet a lawyer other than Lessig who could grasp why 'unlimited' use of spectrum was technically possible, I thought he might be incapable of learning and translating such learning into alternative policies. But, I was curious from the beginning of his term as to whether his short career as an armored officer in the US Army (where he suffered the accident that ended his active duty career) got him technically educated in ways lawyers never are. Tankers have to master LOTS of advanced radios in Armor."

"Powell obviously got a technical tutorial - and it never was from the incessant open Hearings where the Commission normally sits and makes decisions. It became clear to me, from the circumstances of Powell's October 30 speech at the University of Colorado where Hatfield had returned and re-joined academia, when, in that speech, Powell credits Hatfield with teaching him some important things about spectrum and processors, that Hatfield was the key person to open Powell's politically conservative (also known as 'business has all the answers') mind and remarkably to propose a radical new approach to spectrum management policy."

Snip

The Operational Context

COOK Report: Unless one has been following the public presentations made as a part of the Spectrum Policy Task Force process, the profound significance of Powell's endorsement is easy to miss. Powell certainly seems to be running way out in front of everyone in gathering momentum for what can be major change. If the rules are changed in the way that Powell is suggesting to regulate the devices more than the spectrum, it seems certain that wireless in a couple of years can begin to replace the wireline local loop. Succeeding in this would have the most profound economic impact imaginable for the entire economy.

Snip

We are not yet home free. Powell has put himself in a very interesting position. We can no longer berate him as a bumbling idiot and free market ideologue who is deaf to all reasonable technological issues. He seems to have done - in the spectrum arena at least - the right thing. Yet the Commission is not yet behind him. We are just at the NOI phase. The entrenched interests will now wake up and scream that the end of their world is nigh. We will find out in 2003 what Michael Powell is really made of. Will he fight for the conclusions of the SPTF and fight to make them reality and in doing so help bring the industry crash to an end of will he cave before industry political and economic pressure and let the life blood continue to drain from the global telecom and information technology industry?

An insider who knows what is going on far better than we summed it up very well "I think that people who are interested in broadband local loop are thinking that Powell should somehow force companies to do whatever is their particular hobbyhorse. In some ways, by doing almost nothing, Powell is supporting the "fail fast" idea." [But] I'm not ready to go on record as supporting Powell unequivocally, because I don't know him well enough. It's hard to decode the motion of the tectonic plates in the SPTF report - some I don't like, some I do, and some I don't understand very well. But the key good thing is that the plates are sliding, rather than being locked."

Snip

Is American Broadband Infrastructure a Useless White Elephant?

COOK Report: It increasingly looks like the so-called broadband networks of the Cable companies and the DSL-bearing telcos are not what consumers want. They may well be multi hundred billion dollar white elephants. Consider for a moment one of the new technologies rising to challenge them. An Internet "oldtimer" called our attention to Dmitris Vyzovitis at the MIT Media Lab. "I've read his thesis, and he has a very interesting demo that shows how his system can provide essentially an edge-based distributed 'TiVo' with all programs available all the time to all clients while dynamically sharing resources among all the edge machines to minimize bandwidth."

We sent a draft of this write up to Dr. Andrew Lippman, who is supervising Dmitris' work. Andrew responded on December 3. "I wouldn't say that a broadband infrastructure is a white elephant. I would prefer that the infrastructure have a symmetric architecture where all nodes can originate as well as consume bits. Current broadband systems seem to model broadcast networks rather than the Internet: fast data down, clicks up."

"It is not clear that this is architecturally hard to change, but opening the network may not be a high priority for a cable system. Also, the appropriate network interfaces have not been developed. The Wang net in the 1980's was better in this regard."

"The idea of a realtime peer-peer protocol is that you can share the channel and thereby scale the network. Information that is used in common need not require a dedicated channel per consumer. Basically, it is an open multicast environment where machines can easily and automatically discover what information is flowing on all the channels and what information is stored in other caches distributed throughout the region."

"We also have the ability to aggregate channels. This means that bits from various machines can be combined to make a larger or higher quality distribution."

"But -- it scales because of channel sharing, and it does require a way to communicate between members of a network. This scaling will not necessarily help in a broadband infrastructure where the bits emanating from a single machine are constricted, and that is a problem with those kinds of architectures. It [this kind of architecture] is also not consonant with the intention of the Internet."

COOK Report: Perhaps we need to be more specific in our assessment of the telco cable-co broadband infrastructure. The white elephant is the architecture not the infrastructure. Change the architecture and perhaps you can then give your customers what they want. This of course is no small proposition. We hope to be able to explore it in the near future.

Snip

This cable company foolishness [complaints about p2p and bandwidth hogs] looks in part like the outcome of the FCC's ill advised intention to declare broadband as an information service and therefore something that need not be regulated. One can only hope that the technology companies are coming to understand that under the conditions that the FCC is allowing to emerge, consumers will no longer buy their new products. Why should they when they are restricted to a web that the media and tv/telcos have done their best to turn into television? These companies would seem to want only a tool for selling to and controlling the user. Something the user does not want. This is a betrayal of the promise of an edge-controlled Internet. Undoubtedly 2003 will prove to be an interesting year.

A double issue on VoIP in the context of new developments in Spectrum Policy Reform and P2P

The Enterprise Prepares to Leave the PSTN:

Find out how to order single copy ($270) or group license ($540) for just the January - February 2003 issue.

Contents:

VoIP, Wireless, and P2P Erode Local Loop

Enterprises Begin Migration from PSTN as VoIP Both Matures Outside of Enterprise and Collides with International Tariffs

We Review Wide Range of VoIP Economic & Technical Issues as FCC Chairman Powell Embraces Spectrum Reform pp. 1 - 14

The Three Roads to Fail Fast

The First Road: A Wireless Revolution at the FCC? p. 4

The Spectrum Policy Task Force -- an End Run? p. 5

Watch for the Political Manuevers - From Fail Fast to Congressional Counter Pressure p. 7

Excerpts from Powell's October 30 Speech p. 8

The Significance of Regulating the Device and not the Spectrum by Dave Hughes p. 10

The Second Road -- P2P or the "Bandwidth Hogs" Versus the Wireline Trolls p. 11

Preventing "Bandwidth Abuse" -- Irrelevant Networks Versus the Internet p. 12

Is American Broadband Infrastructure a Useless White Elephant? p. 13

New Cuts that Will Further Drain the Life Blood of the PSTN p. 14

The Third Road -- Foundation Is Being Laid for Enterprise Departure from PSTN --Richard Shockey Describes VoIP Progress Enterprises Adopt SIP and Move Voice to Data Nets While ENUM Advances pp. 16 - 24

Economics of Enterprise Voice p. 16

SIP's Power Resides in its Simplicity p. 17

ENUM for Voice Extranets p. 18

ENUM in US - Minimalist versus Maximalist with Government as Arbiter p. 21

Why the LECs Loose, p. 22

Symposium Discussion

IP PBX and Centrex Business Models . . . VoIP Impact on Telco Economic Problems. . . A Nethead Analysis from Inside Telekom Austria of VoIP. . . ENUM and Related Economic Issues. . . VISION NG and UPT. . . Global IP Sound pp. 25-54

ENUM and VISION NG Issues p. 26

So Where is the Phone Company Future? Richard Stastny Replies p. 28

VISION NG and UPT p. 31

UPT and ENUM p. 34

Infrastructure for ENUM p. 35

Carrier Adoption of VoIP p. 35

Global IP Sound p. 37

Further ENUM Progress p. 38

Internet NOC Dial by AS Number Project p. 39

Further Detail on INOC p. 40

Panama and VoIP Restrictions p. 41

VoIP-Based ByPass Carriers p. 42

Global Growth of Carrier PSTN Switched Minutes Slowest in 20 Years While VoIP Minutes Sky Rocket p. 43

How Long Will it Take to Change . . . ? p. 44

Two Camps Within SIP - End-to-end Versus Service Provider Walled Garden p. 44

ITU Activities with SIP and ISUP Interworking p. 45

A VoIP Walled Garden from Pulver p. 46

Sonus Product and Services p. 46

Get Free VoIP Calls with Internet Service - in Japan p. 47

Voice Quality p. 47

VoIP Threat to the ILECs - From Cable or from Vonage? p. 48

Carrier Driven VoIP Peering Issues p. 49

Verisign, Illuminet and ENUM p. 49

LECs Complain About Consumption of Phone Numbers by VoIP Use p. 49

Gatekeeper or Proxy? New Ways to Number p. 50

ENUM Encore p. 51

Opt-in for ENUM p. 52

URLs for ENUM Trials p. 53

VoIP moves by IBM p. 54

Broadband Is the "Killer Application" -- Open the Broadband Gates and What Users Send Exceeds What They Receive -- Participants from Our Asset Based FTTH Symposium Discuss Current State of Broadband Application and Business Models pp. 55 - 66

Preserving Neutrality of Internet Attachment and Transport Rises to Level of National Policy Issue -- To What Extent Can the Network Provider Restrict the Customers' use of the Network? pp. 67 - 71

Building Asset Based Telecom in the Shadow of Mt Everest -- Vision of Economic Development and Preserving Sherpa Culture Becoming Reality in the Teeth of Maoist Insurgency on the Eve of 50th Anniversary of First Ascent of Everest -- Classic Example of the Benefits of Edge Controlled IP Technology With Users Building Infrastructure that the Government and Telco Cannot Provide pp. 72 - 89

ICANN Designed to Serve Narrow Special Interests and Established to Exploit Dissatisfaction with Government -- Result Was to Remove Recourse to Administrative Law and Open Door to Four Years of Abuse by the Clique Manipulating the Process -- 1998 Lessig Speech a Prophecy of What Would Happen pp. 90 - 92

Highlights pp. 93 - 104

Executive Summary pp. 3, 105 -107

EXECUTIVE SUMMARY Voice over IP

We publish a combined issue on the take off of Voice over IP (VoIP). This technology is now reaching maturity and being applied widely throughout the enterprise and globally as it can be gatewayed into the GSTN in any country reached by the Internet. The result will be to increase the traffic hemorrhaging from circuit switched networks onto IP nets. And the same time it will only increase the amount of cash being bled from the telco's bottom line.

A month ago when we published the first half of this issue Michael Powell looked as though he had undergone a sudden epiphany that by means of the FCC spectrum reform process might enable the American telecommunications industry to revive by permitting changes in spectrum regulation that would throw the door open to wireless replacement of much of the wireline local loop. For the first time the FCC admitted that digital radios had capabilities that earlier analog radios did not. The significance of all this is discussed in detail in the first dozen pages of this issue.

Since our publication of these pages in early December the FCC has come out with two forward looking Notices of Inquiry as follow through to the recommendations of the spectrum task force. The apparent about face was so stunning we wondered whether Powell might not be a bumbling fool but rather a states man. Suddenly however on January 6, 2003 as we go to press what Powell gave with one hand he is now ready to take away.

According to Converge! Network Digest Vol 10, No 2 "FCC Chairman Michael Powell is drafting a plan that would gradually eliminate requirements that incumbent carriers provide their competitors with wholesale access to their local networks, according to a front-page story from The Wall Street Journal. The new rules would be "the most drastic changes since the Telecommunications Act of 1996" and would be a major victory for the four regional Bell companies. The biggest losers would be AT&T and WorldCom. According to the article, Powell's current draft plan calls for a two-year transition period before competitors would lose their discounted access to the ILEC switches." One could cast this latest action designed to make the LEC monopolies complete as a witless move to breathe new life into dying companies and in so doing to make sure the industry does not recover. If one were charitable one might see it as an ultimatum to the wireless industry that it had two years to complete a wireless alternative to the LEC local loop. Unfortunately there is some doubt that the regulatory process would be streamlined in sufficient time for new radios to compete with the Powell-blessed local copper "fortress" of the dying LECs.

The Republican administration it would appear remains incapable of conceptualizing in any way shape or form that a telecommunications commons as described by Lessig is a desirable policy goal. If property is good, more property is better. To hell with using public resources to build a national infrastructure. We are much better served it would seem by using those same resources to shore up decrepit technology as long as there is money and political clout behind it.

Canada and Now Korea Lead the US

For years Canada has been building telecom infrastructure vastly more advanced than we can coble together out of our free market carnage. Sources in Canada tell us that the Canadian CRTC is prepared to go even further in the very direction of open access to its networks that the American FCC is now abandoning. Now according to a January 1 article in Wired, http://www.wired.com/news/infostructure/0,1377,56525,00.html Korea has succeeded more than any other nation on earth in building a national broadband infrastructure. "With a population of 48 million, South Korea has a formidable position as the world's broadband Internet leader, far outstripping the United States and Europe. As of last month, 10 million Koreans -- which equates to 70 percent of households -- had home broadband connections supplying high-speed Internet access, said Jin-wook Son, managing director of Korea Telecom UK. Most pay about $33 monthly for an 8 megabit-per-second connection. Wireless access, which allows subscribers to access numerous public Wi-Fi networks, costs an extra $8.50 a month."

Koreans spend an average of 16 hours a week on the Internet -- compared to 10 hours for Americans and four hours for the British -- with housewives who shop, trade shares, take classes and get information online generating some 45 percent of all Internet traffic, Son said. [snip] "Initially Internet traffic went overseas, 98 percent of it," Son said. "There was no Korean content. But this has changed completely. Domestic traffic is now about 85 percent, and overseas, 15 percent. However, this does not mean that overseas traffic has decreased. Instead, domestic traffic has increased." [snip] Telecommunications analyst Susan Richardson said Korea's broadband success story is partly due to elements specific to the Korean market: high-density living, state-controlled local exchanges and "competition that was quite hearty to begin with." In particular, "the government really decided to seed broadband rollout as an economic and social benefit for Korea," she said. [snip] "So many people are trying to see first what the killer application will be for broadband. In our experience, broadband itself is the killer application," Son said.

This issue contains a revival of some of the broadband discussion in our Aug- Oct Asset Based Telecom issue. In addition to the hypothesis that broadband itself could be the killer application that enables broadband, it contains evidence from Grant County Washington that in communities where bandwidth is largely unlimited users develop voracious appetites and that upstream bandwidth is often greater than downstream due likely to the use of P2P applications. We may soon find out that our legacy networks have the wrong architectures.

VoIP Matures and Enterprises prepare to Leave the PSTN

An interview with Richard Shockey emphasizes 2002 as the year in which SIP based products reached the market in a large way enabling corporate information managers to begin to move voice traffic onto their data networks. With devices like ether phones and Cisco VoIP gateways and SIP based proxy servers traffic that stays within a large corporation is now much cheaper to route over its data networks than over the PSTN. With ENUM maturing the way is open to ENUM registries designed to facilitate industry based "extranets". At some point that is not too far off. Our experts say that SIP and ENUM can combine to replace SS7 signaling that enables the PSTN.

In the meantime the time has come for readers to pay close attention to SIP. They should repeat the following until they know its essentials by heart. "The really important idea that David talks about, after the notion of a dumb network that can be the foundation of any IP-based networked application, is the Session Initiation Protocol. It will allow any device to find another device and begin to communicate." Isenberg : "'What HTTP did for documents, SIP (Session Initiation Protocol) will do for communications." Smart Letter #81 December 31, 2002

VoIP Has Come of Age

VoIP is being adopted everywhere. Services like Vonage are making it possible for homes with broadband connections to plug in with the use of Cisco AT186 gateways. Carriers are adopting SIP based products of Sylantro and Sonus. With a carrier you may no longer know whether you voice calls are circuit switched of packetized. While some like Vonage are open to everyone many like those of Cisco and Sylantro are oriented to enterprises. Enterprises may install the infrastructure and operate it themselves or connect to outsourced infrastructure where they pay a fee for service and don't even need to worry about purchasing the equipment.

SIP enables IP overlays of other countries carrier infrastructure. Richard Strastny of telecom Austria talks in detail about how the VISIONng project has been used with ENUM to build trials for UPT or the use of Universal Personal Telecommunications numbers. A large part of the economics of VoIP will revolve around new services that are enabled with the mating of projects like VISIONng and ENUM. These services can only happen when voice is carried on a packet switched end user controlled network.

ENUM

ENUM is nearing global commercial deployment with some interesting new capabilities. We list most of the national trials that are underway. In his interview with us Richard Shockey described minimalist ENUM. "All you want ENUM to be able to do is to deliver the minimal amount of information in the DNS necessary for SIP to establish a connection between two end points." However, by the beginning of January, ENUM was being seen in broader terms. Again according to Shockey who pointed out that a rapidly growing number of ENUM trials are testing variations on three views.

(1) Minimalist ENUM as a service control point that performs a linkage from the Internet to the PSTN.

(2) Calling party control where through use service records in a field in the NAPTR record someone may choose how much of their personal contact information to expose to the global DNS. The control here is along the lines of whether or not a person wishes to make it easy for the world to reach them on whatever communications devices and at whatever addresses they chose.

(3) Called party control. Where through different use of fields within the NAPTR record someone may control the kinds of devices on which segments of the outside world (as they are defined by the called party) will be able to get through. A user could presumably control whether or not a calling party could reach him on his land line or cell phone or who could or could not send him a fax.

These choices are described by Shockey in his recent Internet Draft. They are not necessarily mutually exclusive. Those readers wishing more detail should very definitely read the draft.

Meanwhile Telecom Austria has a windows-operable plug-in that will allow VoIP users to make calls that poll most of the currently operating ENUM trials around the world, linking after a fashion the databases of the various trials. It looks to Richard Shockey that ENUM will finally roll out in 2003. The biggest unknown in the US emerged in December with the issuance by the FCC of a NOI on E911 services in the VoIP arena. The backers of this are generally the ILECs who would like to slow ENUM down.

VoIP and International Tariffs

VoIP is hammering international tariffs long set artificially high. The ability to do VoIP and gateway it to the PSTN for a fraction of the normal cost has set up an global industry based on the potential for arbitrage in the price differences. If the official rate to various countries runs between 75 cents and a $1.50 a minute and VoIP calls can be gatewayed both incoming and out going for a few cents a minute, retail prices can be cut tremendously and still leave room for middle men here and abroad to establish very profitable businesses in delivering services at a fraction of the local monopoly telco price.

As long as matters don't get too far out of hand, regulators tend to turn a blind eye to a practice that tends to permit them to leave official tariffs in place because they can be "gotten" around. But it is in these areas especially that traffic leaving the globally switched telephone network has become a gushing torrent. How bad is it? It is so bad that while the practice sprouted in the third world it has spread to Europe and other western countries where Data arms of major national carriers are so hungry for business that they are taking it away from the switched side of their same company. Thus grey and black market VoIP arbitrage can be found almost everywhere, while surviving Greenfield fiber players are racking up vast growth in VoIP minutes.

An article in the December 16, 2002 New York Times is worth reading. http://www.nytimes.com/2002/12/16/technology/16TELE.html The author asks: "Will the price of international telephone calls continue to decline? And will more people choose wireless technology over land lines? The answers lie in whether new technologies continue to rival existing ones in the coming year. A glance across the humbled telecommunications industry might suggest that its largest companies are worried about other pressing issues in 2003, chief among them stabilizing the market for the tried-and-true service of placing calls from a phone tightly tethered to a jack.

After all, telecommunications and technology companies lost $7.6 billion in global market value from March 2000 to September 2002, as the industry was gripped by stunning collapses, financial scandals and an effort to absorb excess capacity on globe-spanning communications systems.But alongside the industry's search for its direction after such turmoil are trends that threaten to destabilize global telecommunications further in 2003. These trends could be described as the start of a cannibalization of established services by disruptive new technologies.. . ." [Snip]

Namche Chatauri

An inspiring look at asset based telecom on the slopes of Mount Everest.

May a Provider Restrict Customer use of an IP Network?

Finally we look at an important struggle seeking the preservation of neutrality of Internet attachment. We follow Larry Lessig's discussion of how "a strange coalition of companies and consumer activists, including Disney, Microsoft, and the Media Access Project, sent a letter to the chairman and members of the FCC, asking the government to ensure the "ability of consumers and business to communicate with one another ... without obstruction from network service providers." Both steps signal, LeggMason reported, a "key policy issue" that will increasingly frame the telecommunications debate: "the extent to which the network provider can restrict the customers' use of the network." What is going on hearkens back in part to the question of the Cable co's complaints about bandwidth hogs covered in the early pages of this issue. We note that when these folks make arguments about maintaining quality of service what they are saying essentially is they want to restrict customer's use of the network in order to maintain their central control.

ICANN

We discuss Lessig's Oct 15, 1998 prophecy of ICANN's fate in the light of the most current events.

The Paradox Of Commoditization

Trying To Save What Is Inevitably Lost, We Lose What Could Otherwise Be Gained

The monopoly control of customers by Legacy networks is destroying the economic benefits that could be obtained from the on going pervasive and inexorable commoditization of telecom and information technology. We face a paradox. While we have eyes, we cannot see.

We act as though we could wish away what is happening to new products and prices. But the fact is that the on-going commoditization of technology cannot be undone. Products will continue to get better but they will also continue to fall in price. In the face of these dynamics jobs will melt away. The only growth in the industry will be come from a variety of education, customer support, strategic evaluation and consulting positions. The only additional growth can come from use of the technologies in an open architecture that preserves the freedom to innovate.

Read more: April - June 2003

An issue on IPv6 in the context of edge based tools like Vonage, Wi-Fi and Edge v6 that enable the customer to become the competitor of the service provider.

Building Tools for Edge Based Control:

Find out how to order single copy ($135) or group license ($270) for just the March 2003 issue.

Contents:

Building Tools for Edge Based Control

Understanding Edge IPv6 versus Backbone IPv6

VoIP and Vonage - When Customers Become Competitors

Open Spectrum Versus the Spectrum-as-Property Worldview pp. 1-4

IPv6 Going No Where

Political Push Fails to Propel Elegant Solution Lacking Market Pull

Former Drivers of Address Space, Device Addressing and Wireless Seen As No Longer Critical

While Very Important at Edge, v6 to See only Niche Backbone Deployment pp. 5 - 13

Is IPv6 Necessary? - One Year Later p. 10

IPv6 at the Edges

IPv6 Seen Not as a Backbone or Transport Solution But Rather as User-Applied Edge-Based Overlay Supporting End-to-end Applications pp.11 -16

Two Internet Futures - With Edge IPv6 and Without Edge IPv6 p. 17

Customer Owned Networks - ZapMail and the Telecommunications Industry by Clay Shirky

pp.18 - 21

Discussion of Clay Shirky's ZapMail Essay

Unlicensed, User Financed, Edge Based Connectivity Technology -- Locustworld Meshbox in Context of Building Edge Based Wireless Transport pp.22 - 24

Open Spectrum - Property Rights World View Dies Hard

Exploring the Problems with the Farber-Faulhaber Have-Your-Cake-and-Eat-it-Too Spectrum Arguments pp.25 - 30

ICANN and the Failure of "Self Regulation"

How the National Science Board was Overruled by the Clique that Became ICANN - Part One pp.31 - 33

Governance by Lawrence Lessig

Lessig Demonstrates How the Would Be "Self Regulators" Took Control - Part Two pp.34 - 39

Interview, Discussion, and Article Highlights pp. 40 - 47

Executive Summary pp. 48 - 51

EXECUTIVE SUMMARY

The Action IS Taking Place at the Edge

At the same time that AOL and the phone companies are trying to staunch the flow of blood (cash) from the center, innovation is taking place at the edges. The US has built a bankrupt national fiber system. Under Michael Powell, the FCC zigs and zags faster than a speeding bullet between innovative spectrum policy and a retrograde insistence that, if just allowed, the walking dead of last centuries telecom, the LECs and Cable Cos will invest in building meaningful infrastructure.

Powell, it seems, isn't much interested in getting the details correct. Rather than taking the trouble to understand the dynamics of the technology in the market place as demonstrated by Clay Shirkey in his ZapMail essaythat is republished in this issue, Powell goes on to insist that it was unfair regulation imposed by his democratic predecessors that has bankrupted the industry.

According to an article in the February second New York Times http://www.nytimes.com/2003/02/02/business/yourmoney/02FCCC.html?ex=10451732 42&ei=1&en=c807a35b91f72fd1, Powell has asserted that deregulation "should not be like a dessert that you serve after people have fed on their vegetables and is a reward for the creation of competition." Rather, he said, deregulation is "a critical ingredient to facilitating competition." Powell is talking the same naive faith in industry self-regulation that put the ICANN fox in charge of the DNS hen house. Powell's statement ignores the central issue that the phone companies would be acting against the interests of their stockholders, when, if given a chance, they did not charge the most extortionate rent for the use of their monopoly possible.

The Times writes: "Mr. Powell and his supporters say a change in the rules will stimulate the economy by encouraging the largest phone companies and their rivals to build more networks and spend more at equipment makers like Lucent, Corning, Cisco and Intel." If this is what Powell truly believes, he is living in a dream world and ought to be removed from his position by the Congress for incompetence. The fact is the phone companies cannot under any circumstances, except those of government enforced monopoly high prices, use the networks they already have. Given their debt they have no money to buy new equipment for new networks. Let's look at the equipment makers that Powell rattles off as companies that would allegedly benefit. Cisco yes, Intel perhaps. But Lucent has gone from 10 billion a year in revenue to two billion because it doesn't make equipment that sane management would buy were it too invest in a new network. With all the fiber in the ground the only new market in fiber for Corning is fiber to the home and if Powell gets his way and gives the telcos a monopoly on that, no sane homeowner would want it.

But Powell, it seems, is interested much more in ideology than in accurately figuring out where the technology is going. Dave Hughes caught Powell giving Senator Brownback of Kansas in correct information about Wi-Fi in his testimony on January 20 as Powell stated that the radios used would transmit at best 300 feet on an 802.11b network.." Hughes skewered Powell in public as well he should have. Within 24 hours Hughes heard back from a Powell assistant. "Thank you for your comments. In the passage you reference below the Chairman simply made a mistake." One wonders how many "mistakes" Michael Powell is making these days?

The Canadians are not making mistakes. They are building a working national fiber system. They are investing 200 million dollars in linking all public schools throughout Quebec with fiber and are doing it such away that all municipal governments with be on the same fiber. This includes northern Quebec where only the most remote villages will rely instead on broadband radio.

Robert Proulx President of XIT telecom in Quebec told us in a February third conversation that his small company has all the business that it can handle including major fiber community network builds in Hungary and in Jordan.

The Canadian CRTC is taking a very different tack from the American FCC. Telecom in Canada is understood as a major national infrastructure resource in the same way the US understood the interstate highway system 50 years ago. Now our dominant ideology permits investment only in private corporate resources. Already 17th among the global users of telecom services according to a recent OECD study, the United States economy will suffer in coming years because of our current ideological shortsightedness.

The future is in asset-based and customer-owned networks. We have installed cable modem service in order to move our long distance calls to Vonage. Suddenly unlimited long distance in the US is flat rate. All of Canada is 5 cents a minute and most of Europe and much of Asia is not much more.Innovation at the edge is possible and as prices continue to fall the huge companies that Powell want to serve will become more and more unwieldy. Fiber to the home is worth having only if the homeowner can control it.

Meanwhile the edges continue to cannibalize the center - like a million termites chewing on the soggy log of the PSTN. BellSouth was the first ILEC to acknowledge the inevitable and at the end of January announced that it would begin to resell Vonage to its DSL customers. See http://news.com.com/2100-1033-982606.html And from a trusted source we are told that in Japan NTT has effectively ceased development in its circuited switched landline network.

Backbone v6 going no where pp. 5 - 11

Farooq Hussain explains how reasonable uses for IPv6 in Internet backbones have evaporated. DHCP and Nats acting as firewalls have gotten the need for v6 as a sources of extra address space well under control. The idea of universal addressability across the internet for all devices has receded in importance.

He cites very interestingly that in the United States almost all the support for v6 comes from the defense department. In Europe it comes from the European Commission and in Japan from a mandate by the Japanese government.

Mandate or not there no longer seems to be any market pull. End to end applications like voice over IP that once were thought to be dependent on v6 are being re-engineered to work with NATs in the v4 world.

3GPP, which is the third generation mobile project, adopted IPv6 as their protocol of choice in 1999. In doing so it gave v6 the strongest endorsement it has ever had. Yet because at the height of the bubble the 3GPP people decided to build their own internet parallel to the global v4 internet, their plans now seem rather silly. With the slowdown in wireless growth has come a slowdown in wireless demand for IP numbers. If we assume that with the arrival of software defined radios over the next few years radios will communicate with each other on the basis of IP rather than geography this is likely to delay indefinitely the need for v6 in wireless devices.

SONY has announced that all of its devices will speak v6. However in the absence of widespread v6 deployment SONYs products will also have to communicate in a v4 world, The problem is that if the communicate well in v4 there is likely to be no use for their v6 capabilities. It seems that even Jun Murai is no longer promoting v6 wholeheartedly in Japan. Farooq concludes that we will likely have the worst of all worlds with most of the internet running v4 and few isolated instances of v6.

When we asked Farooq about the January 22 announcement by Telehouse of an IPv6 peering exchange in New York, he responded PAIX has had the ability to support v6 for at least two years, The more interesting announcement was the one for the exclusively v6 exchange set up in France as part of the EC initiative. Also has hardly any takers except those who are compelled by politics to go there by virtue of being participants in the EC initiative. It's fine for Telehouse to make this kind of announcement but the capability is of little commercial interest either to enterprise or service provider networks. There's simply not enough traffic volume with v6 and there are so few native v6 networks that none of them need to go to Telehouse or any other IX to exchange traffic. The IX's used for v6 have been established primarily to foster R&E projects and are sustained primarily on non-commercial rationales.

Edge based v6, pp. 11 -17

In talking with Bob Frankston, David Reed and Francois Menard, we discover that edge-based v6 is very different from v6 in the backbone. Farooq agrees. It seems that v6 at the edge can be used by end users to establish their own applications and perhaps even routing by using v4 addresses in the v6 packet headers.

Frankston has written: IPv4 (or just "IP") represented the birth of the Internet by shifting the power to define the network to the users at the edges.

The Internet has thrived because supply is driven by demand. New application services are supported by simply providing more transport (or IP) capacity. Rather than wait for new capabilities to be defined, users will create their own solutions. (When I say "users" I don't mean all users create applications. It only takes one motivated, creative individual with some time on their hands to create an application that will be adopted by millions of others. We just don't know which user that will be.)

Francois Menard commented: I'm trying very hard to get [Canadian] municipalities to implement IPv6 open access across municipal FTTH networks so that MPLS doesn't squeeze-in and end-users become required to run PE`s. I'm seeing ISP's provide value added services by offering commercial access to tunneling servers on their premises which bridge to the good old legacy Internet. For as long as two service providers across two different municipal FTTH system would want to interconnect with IPv6, there would then be a parallel Internet.

A current problem is the absence of a good v6 tool set for end users. Right now it is not clear where one will come from. Standards development would prove useful. But by whom? The IETF is very unlikely. The IEEE perhaps. The Consumer Electronics Association claims to be doing work in the area. Unfortunately, we have not had enough contact to evaluate them.

ZapMail pp.18 - 20

When does a service become just another product that the phone company's customers can deliver best and at lowest cost for themselves?

Clay Shirkey has written a powerful essay that likens the Local Exchange Carriers' world view to that of Fed-Ex when it though it needed to build a fax network to gain an advantage that other overnight carriers didn't have to offer their customers only to find that the customer could deliver information by fax much more cost effectively themselves.

The business Fred Smith imagined being in -- build a network that's cheap to run but charge customers as it if were expensive -- is the business the telephone companies are in today. They are selling us a kind of ZapPhone service, where they've digitized their entire network up to the last mile, but are still charging the high and confusing rates established when the network was analog.

Discussion of ZapMail, pp. 21-24

Adrew Odlyzko agrees that VoIP will lead to the flat rate commoditization of long distance phone service. but he them wonders about wireless being able to create a substantial enough infrastructure for voice communication.

A product known as Locustworld may have the answer. "A UK company has produced Mesh wireless technology which you can buy and install, today, for under £300. Fancy setting up as a rival to BT Openworld? Even in a remote village? Easy: buy a Locustworld MeshBox; half the price of a home PC. You're in business."

"The software is the key to Locustworld. Written by text-message pioneer Jon Anderson, it configures a group of wireless access points into a coherent "mesh" and connects them to any broadband Internet node available."

"Most experts regard the mesh approach as hugely complex, because of the effort needed to set up the mesh. The system used to be known as a "parasitic network" - although the fashionable term these days is "symbiotic" - the idea is that you turn a group of wireless nodes loose, and tell them to introduce themselves to each other. Then you set up routes through the mesh. It can be fiendishly complex, but Locustworld's mesh does this for you. You just buy the node from them: the current model is £250 plus VAT."

"The last legal obstacle, according to founder Richard Lander, was the decision by Oftel, allowing people to share their broadband with up to 20 others.

Farber Faulhaber versus Open Spectrum pp. 25 - 30

A discussion of the problems created by the presentation of a paper that looks to the past encourages spectrum auctions and their maintenance of property rights in spectrum while saying oh by the way you open spectrum folk may be given so called "easements" since your magical radio technologies will not get in the way of our much more rational corporate approach.

How NSF Was Prevented from Removing the government from domain names? pp. 31 -34

Don Mitchell explains that a major policy change by the National Science foundation was aborted. The change would have ended government involvement in the DNS. It could have nipped ICANN in the bud. But this was not to be.

Had the cooperative agreement concluded in spring of 1997, as the NSF intended, the problem of institutionalizing the IANA function would have been forced out on an open table (or, possibly made moot) by the demand for (and creation of) additional TLDs. It might also have been forced into the courts. It certainly would have become more clear to many more people that one of the most critical underpinnings of the Internet, the IANA function, had no basis in law. Neither domestic nor international. If the play had been open, the high stakes mania that festered into the Internet bubble might well have not reached such a fever pitch. The industry might not have ridden so high and fallen so hard.

The over ruling of NSF plans for termination by Burr and her ISOC clique and the resulting extension of that agreement allowed a small number of high stakes players to keep the game closed. The game was still closed in June of 1999 when in the ICANN board emails we published Esther Dyson, IBM, Vint Cerf and Mike Roberts hatched a strategy to get money for ICANN from the venture capitalists of Sand Hill Road by warning them that their investment were in danger if ICANN did not succeed and by meeting with Tom Kalil in the White House to seek support. Today the investments of the Sand Hill VCs have largely vanished, the IANA function is still not institutionalized. Indeed today February 3, 2003 the IANA function was just handed back to the same closed group of high stakes players who profess to operate ICANN with openness with authority. In reality the game is still closed.

Lessig on Governance pp. 35-40

Larry Lessig in the document that follows gives the best overview that we have seen of the details under girding ICANN's construction in the year 1998. In the talk that we republish with his permission, he shows how the GIP ISOC Clique found in Joe Sims an attorney who enabled them to take advantage of libertarian distrust of government to create an ICANN that they could use for their own narrow ends and brought on four years feuding and distrust. ICANN from the very beginning was broken. Such was the distrust of government that no one would own up to seeing the brokenness. Lessig saw it however and his analysis of what could be expected from ICANN from the position of hindsight more than four years later reads like prophecy.

News Item Dave Hughes to Chairman Powell - Jan 22, 2003

FCC Chairman Powell in testimony to the US Senate. "That's the way that current technology is configured and deployed. Right now the leading standard of 802.11 a b and g in their very first have a limit in their range. At best 300 feet on an 802.11b network.. " THAT IS AN ABSOLUTELY FALSE STATEMENT!!!!! 'at best 300 feet' WHY DID HE MAKE IT?

1. There are over 10,000,000 Wi-Fi systems out there. 1.5 million more each month. 2. There are over 2,500 and probably over 4,000 Wireless ISPs using Wi-Fi radios doing business across the United States as I speak. Largely RURAL. I will wager not ONE of them is serving customers 300 feet or less. Most are from 1 mile to 10 MILES using off the shelf equipment certified by the FCC and within the power limits - 36dBm EIRP - prescribed as the maximum for 802.11b radios. 3. Cisco sells tens of thousands of 802.11b 'Aironet' radios which are ADVERTISED as reaching 18 miles at 11mbps or 25 miles at 2mbps! http://cisco.com/univercd/cc/td/doc/pcat/350wlbr.htm#fea 4. Young Designs Inc sells COMPLETE 'Wi-Pop In A Box' system for communities advertised at 12 miles! Standard, certified, systems. 5. Well funded companies are ramping up to deploy Wi-Fi across cities all over the US. One announced today it was targeting 80% of the Front Range Colorado population. And yes, they will backhaul over broadband wired networks, to answer your question accurately, Senator Brownback. 6. I have spent the last 3 YEARS buying, deploying, testing Wi-Fi 2.4ghz as well as other Wi-Fi Bands (915mhz, 5.7Ghz) radios for 4 more years from half a mile to 15 and more miles. And I AM a Wireless ISP ALL of whose customers are Wi-Fi 2.4ghz at ranges from a third of a mile to 2 miles!

I KNOW what I am talking about. Why doesn't the Chairman of the FCC? Or his Staff, who prepared him for this Hearing? Or is there a hidden agenda there? That kind of completely false and misleading statement before Congress angers me! For in effect he was telling Senator Brownback, whose 'colleagues' and constituents CORRECTLY identify Wi-Fi as ONE technology which can bridge the 'last broadband mile' until whole new generations of radios are invented, that Wi-Fi is of NO REAL VALUE for Broadband. I KNOW what I am talking about. Why doesn't the Chairman of the FCC? Or his Staff, who prepared him for this Hearing? Or is there a hidden agenda there?

That kind of completely false and misleading statement before Congress angers me! For in effect he was telling Senator Brownback, whose 'colleagues' and constituents CORRECTLY identify Wi-Fi as ONE technology which can bridge the 'last broadband mile' until whole new generations of radios are invented, that Wi-Fi is of NO REAL VALUE for Broadband.

First Mile Technologies

Fiber & Wireless Technology Can Replace Copper Loop But Lack of Politically Viable Business Model Prevents Progress

License Exempt Wireless Flourishes While Private Fiber First Mile Builds Struggle with Grid Lock

Industry in Absence of Capital Is Eating Its Seed Corn

Introduction

This triple issue of the COOK Report covers technologies of the first mile. It offers an encyclopedic treatment of the state of fiber to the home and enterprise. As readers will see our discussion covers in a much more sophisticated manner than we did a year ago the business models, technologies and architectures of what Alan McAdams calls, in his IEEE workshop report, Advanced Fiber Networks. We outline in a detail not seen elsewhere the range of the possible. And in a three-hour interview with Steve Stroh we cover the waterfront on broadband wireless Internet access. Anders Comstedt, the Managing Director of Stokab gives us in an interview the evolution of the business model of Stokab, Stockholm's dark fiber provider. Finally Roxane Googin explains the forces behind the on-going commoditization of the industry showing why they are destructive of old models of business value and why MicroSoft is likely to begin the erosion suffered by the LECs. Over the long run its OS monopoly is unlikely to with stand the onslaught of the open architecture business products needed.

The potential for extraordinary transformation is here. But not the will. Instead we are eating our seed corn. Wireless is a bright spot. But across the industry people are hitting the wall and companies that can make sales are laying off what remains of their brain power. And even in wireless there is significant talent unemployed. The disruption is perhaps inevitable as the new, open technology continues to push everything else over the cliff. One hopes that some new equilibrium will soon be found.

Read more: July - September 2003