Slides available: BEREC expert workshop on IP-Interconnection (Peering and Transit) in cooperation with OECD

Update: BEREC website was redesigned and the slides fell off. They can still be found here in this open directory http://berec.mp.bi.lv/files/doc/berec/oecd/
On November 2nd, BEREC organized a workshop on IP-interconnection together with the OECD. All the slides are now available online.  And to save you from reading the whole post, here they are:

• Dennis Weller, Senior Advisor, Navigant Economics "IP Traffic Exchange;  Market Developments and Policy Challenges"
• Martin Levy, Director, Hurricane Electric "The Background of Internet Interconnection"
• Scott Marcus, Director, WIK-Consult, "IP interconnection, traffic trends, and wholesale and retail prices"
• Bill Krogfoss, Strategy Director, Chief Technology Office Alcatel-Lucent "Internet Economy and Content Peering"
  
• Falk von Bornstaedt, Head of Peering, Deutsche Telekom "IP Interconnection and differentiated QoS."
• Patrick Gilmore, Chief Architect, Akamai 
• Eric Ralph, Chief Economist of the Wireline Competition Bureau, FCC (Video message
  and teleconference); (no guarantee that the video works).
  

This was a direct result of the OECD High Level Meeting on the Internet Economy in June, where through conversations in the halls we noticed that there was a difference in the way regulators and Internet peering coordinators discussed interconnection. The workshop was a huge success, several people from the internet peering community flew in from Vienna for one day even though there was a RIPE-meeting going on too. 

A couple of points to take away from the meeting are:

• Peering agreements are for 95%+ handshake agreements, without any involvement of lawyers. They take 3 minutes to set up technically. 
• Both content providers and eyeball networks are working on getting content closer, faster and cheaper to the consumer. This benefits both parties. An interesting example were Google Global Caches which are now placed in networks around the world, but whose effect can most profoundly be seen in Africa where for instance the traffic over the Kenya Internet Exchange Point increased by several hundreds megabit/s peak after a cache was installed, saving the local internet community hundred thousands of dollars every month
•  The market for peering and transit is highly competitive and highly dynamic, with switching barriers being extremely low. A change in routing from one transit provider to another can literally be done in minutes. The effect of a peering agreement is almost immediate. 
• The people whose job it is to interconnect IP-networks speak of themselves as a community, even though some of them disagree quite considerably on how it should be done and who plays what role. 
• Peering and transit is done between all kinds of networks, even the European Commission has an AS-number and could set up it's own peerings.

 I think everyone looks back at a very successful event, that was seated to capacity. 

 

BEREC expert workshop on IP-Interconnection in cooperation with OECD 

November 2nd, Bloom Hotel Brussels, 9:00-17:30  

The goal of the workshop is to bring experts from the IP- interconnection community in contact with experts on interconnection from national regulatory authorities and to discuss future interconnection in an all-IP world.

The Internet’s way of using peering and transit as the basis for commercial negotiations differs considerably from the telephony’s world of Calling Party’s Network Pays. As a result even when talking the two worlds seem to be speaking about different things even when using the same words.

BEREC has been looking into these different approaches to interconnection in a series of papers since 2007 (ERG Report on IP-Interconnection 2007, ERG Common Statement on Regulatory Principles of IP Interconnection 2008, BEREC Common Statement on NGN future charging mechanisms, 2010). The OECD has studied Internet traffic exchange in a series of reports in 1998, 2002, 2005 and in a forthcoming paper in 2011. Furthermore, it has studied Internet traffic exchange in relation to the development of local content in cooperation with UNESCO and it has also organized a workshop on the topic in 2001 in cooperation with the German government. IP-interconnection markets are global markets crossing national borders and even continents. Therefore the OECD is singular in its analysis of trends in Internet interconnection taking a global perspective. Following the same objective of safeguarding competition, BEREC and the OECD take this workshop as a starting point hopefully to be continued in the future.

The format of the 4 session is intended to allow for an extensive discussion with the audience.

Programme
9:00-9:30 Registration and Coffee

9:30 – 10:00 Opening words by Monica Ariño, BEREC and Sam Paltridge, OECD

10:00-11:30 Session 1: The background of Internet interconnection
The goal of this session is to outline the basics of Internet interconnection.
Technical background: Peering (paid or free), transit, partial transit, variants (reciprocal transit
etc.), “Public” versus private, application needs for QoS.

• Dennis Weller, Senior Advisor, Navigant Economics "IP Traffic Exchange;  Market Developments and Policy Challenges"
• Martin Levy, Director, Hurricaine Electric "The Background of Internet Interconnection"

11:30-12:00 Coffee break

12:00-13:00 Session 2: IP interconnection, traffic trends, and implications for
wholesale and retail prices
The interconnection of internet networks has been described in terms of two-sided networks.
The network provider stands in the middle and can receive money from either the content
provider or the consumer. Is this description of the market accurate? What can the theory of
two-sided markets teach us? What contribution can content providers give to the deployment
of networks or alternatively what is the role of network providers in content?

• Scott Marcus, Director, WIK-Consult, "IP interconnection, traffic trends, and wholesale and retail prices"
• Bill Krogfoss, Strategy Director, Chief Technology Office Alcatel-Lucent "Internet Economy and Content Peering"

13:00-14:00 Lunch

14:00-15:30 Session 3: IP Interconnection and differentiated QoS

• Mike Blanche, Program Manager - Network, Peering and Content Distribution, Google,
• Falk von Bornstaedt, Head of Peering, Deutsche Telekom "IP Interconnection and differentiated QoS."
• Patrick Gilmore, Chief Architect, Akamai

15:30-16:00 Coffee Break

16:00-17:10 Session 4: The Future of Interconnection
The Internet hasn’t done away with telephony as a very important means of communication. The growth of mobile telephony has even been more dramatic than the growth of Internet. There have been calls in academic journals and on regulators directly to both impose the Internet’s way of interconnection on telephony and vice versa the telephony’s way interconnection on the Internet.

• Can we expect the market to evolve into one model or the other for all traffic?
• Could a hybrid model evolve?
• What role will new services on networks play? Will new demands be placed on
• interconnection?
• What characteristics of both models should survive?

Panel: 

Eric Ralph, Chief Economist of the Wireline Competition Bureau, FCC (Video message
and telco);
Andreas Sturm, De-Cix;
Mike Blanche, Falk v. Bornstaedt, Patrick Gilmore; Martin Levy

17:10-17:30 Wrap-up 

Cara Schwarz-Schilling, BEREC and Rudolf van der Berg, OECD

Belgian hog uses 2.7TB, but how much money is that?

Ars Technica has the Belgian Bandwidth Hog story and even credits me, thanks Nate, but one element is missing, what does the little piggy cost?

2.7TBybte is roughly 9 mbit/s sustained traffic.

• 1mbit/s/month of transit is $1 wholesale now in London and Amsterdam through Hurricane Electric -->9 dollar
• If you would work with a day and night rythm for the traffic, where the average peak is about twice the average--> 18 dollars. --> do understand that an ISP like Telenet will use peering too, which would result in a lower bandwidth bill.
• If you buy the traffic up front from a hosting company 20 euro per Terabyte retail --> 54 euro
• If you need to buy the traffic because you went over the traffic you bought up front it's 50 euro per Terabyte retail. --> 135 euro

So the top downloader in Belgium is most likely still profitable to Telenet... though marginally

A clip of my presentation on the future of interconnection at Ecomm

Lee Dryburgh put up the movie of my presentation on the future of interconnection. I gave this presentation last year at Ecomm '09 in Amsterdam. It covers topics like Calling Party Pays and Peering and Transit. What I set out to demonstrate was that it is very economically beneficial for networks to treat voice differently than data. This is because all networks benefit from the current Calling Party Pays interconnection scheme. A triple play ISP may see up to 10% of it's revenue and a significant part of its profit resulting from the fact that it has to 7.5 cents per minute to a mobile network. The lowering of mobile termination fees is therefore feared by many ISP's, because it negatively affects there turnover, even though most of the money just passes its bank account to go to the mobile networks. I have embedded both the movie and the presentation for your convenience.

Rudolf Van Der Berg's Presentation at Emerging Communication Conference & Awards 2009 Europe

View more presentations from eCommConf.

Updated: Mobile Net Neutrality in Europe: Google caught freeloading again? ;-)

UPDATE: Seems the quote of Deutsche Telekom was taken out of context, thanks Chris

With almost identical quotes to the chairman of AT&T a couple of years ago chiefs of Telefonica, France Telecom and Deutsche Telekom told the Financial Times that Google is a freeloader.

César Alierta, chairman of Telefónica, said [..]: “These guys [Google] are using the networks and they don’t pay anybody,” he said.

Stéphane Richard, France Telecom’s new chief executive, said: “Let’s see the development of digital society in terms of the winners and the victims. And today, there is a winner who is Google. There are victims that are content providers, and to a certain extent, network operators. We cannot accept this.”

René Obermann, Deutsche Telekom’s chief executive, said Google and others should pay telecoms groups for carrying content on their networks.“There is not a single Google service that is not reliant on network service,” he said. “We cannot offer our networks for free.”

I wrote my article on peering and transit with the AT&T quote as a starter. I sometimes regret it, because it makes it look like a net neutrality paper, but then again, it is here where the lack of knowledge of how peering and transit works continuously causes pain. 

It strikes me time and again that telco's have trouble seeing cause and effect. They see Google introducing a service and then see their traffic going up. So it must be Google that is causing this. But correlation is not causation. It is only when users click on a link that Google starts sending traffic to their network. It is their user who wants to use their network to get access to something that is big or small, but is located on Google's network. Wouldn't it be more fair to say that the mobile co's should pay Google for the increase in its transit bill instead of the other way round? Given the discussion on mobile termination rates, it would be fair to say that the mobile industry is of the opinion that the initiator should pay. Well, you can't argue that Google initiates the transaction, so it's the user then who will pay. 

The funny thing is also that everyone is always picking on big G. Big G of course has big shoulders and is used to some bullying, but it kind of ignores the fact that there are 190 million websites all over the world. I would think that Icanhascheezburger is a culprit in using telco websites too.. why do we never see Telco execs showing the devastating effects of LOLCATZZ picturez.. on their network. 

So telco's please tell us how you are going to pay 190 million for the network usage that your users cause? 

Will China meter the internet - not very likely

The BBC reports that China wants to meter the internet. A proposal to change the BGP-protocol is being discussed in the ITU-T. Andrea Servida, Deputy Head of Unit, Directorate General Information Society and Media, European Commission told this to the House of Lords  (at about 27:50minutes) in the UK. The BBC: "He warned the plan could threaten the stability of the entire internet. (..and)  that China could have a "hidden agenda" in wanting to monitor data flows. And, in later comments to BBC News, he suggested technical changes needed to charge everyone for internet traffic flowing through China could undermine the web's founding principle of openness as well as raising security and stability concerns for all net users."

Some people already reacted that this may lead to an epic battle between China and the internet. I personally don't think this will be the case. I think that it is highly unlikely that the ITU-T will formally push to abolish peering and transit and modifying BGP so that metering becomes possible. This doesn't mean that there aren't people who work for the ITU or people attending their meetings proposing these ideas. 

I base this on developments in regulatory circles in recent years and the time I spend at the ITU in Lebanon and Geneva in the last two months. The traditional model of Calling Party Pays for national telephony calls and international settlements for international telephony is gradually losing supporters. Some excellent examples of this are recent reports by the European Regulators Group and discussions by the OECD on the topic. Academics like Litchfield and Cambini and authors like Scott Markus are steadily gaining traction.

There are still quite some people versed in the old traditions of the telephony world and they have been irritated by the internet's system of interconnection through peering and transit for a long while. Already in 2000 the EU posted a semi-definitive paper on the topic putting an end to any dreams of metered internet interconnection in Europe along the lines of telephony interconnection. It was a topic in WSIS Tunis as well, but there the only mention it got was in paragraph 50:

50. We acknowledge that there are concerns, particularly amongst developing countries, that the charges for international Internet connectivity should be better balanced to enhance access. We therefore call for the development of strategies for increasing affordable global connectivity, thereby facilitating improved and equitable access for all, by:

1. Promoting Internet transit and interconnection costs that are commercially negotiated in a competitive environment and that should be oriented towards objective, transparent and non-discriminatory parameters, taking into account ongoing work on this subject.
   
2. Setting up regional high-speed Internet backbone networks and the creation of national, sub-regional and regional Internet Exchange Points (IXPs).
   
3. Recommending donor programmes and developmental financing mechanisms to consider the need to provide funding for initiatives that advance connectivity, IXPs and local content for developing countries.
   
4. Encouraging ITU to continue the study of the question of International Internet Connectivity (IIC) as a matter of urgency, and to periodically provide output for consideration and possible implementation. We also encourage other relevant institutions to address this issue.
   
5. Promoting the development and growth of low-cost terminal equipment, such as individual and collective user devices, especially for use in developing countries.
   
6. Encouraging Internet Service Providers (ISPs) and other parties in the commercial negotiations to adopt practices towards attainment of fair and balanced interconnectivity costs.
   
7. Encouraging relevant parties to commercially negotiate reduced interconnection costs for Least Developed Countries (LDCs), taking into account the special constraints of LDCs.
   

 Does that mean we're out of mad people demanding settlements? No of course not. The ITU has been given the task to look into the matter and that is where these people flock to. Nobody who is actually responsible for peering and interconnection attends these meetings, so it's like a zoo for dinosaurs of a by gone age.

In Lebanon an African nation demanded to know when the ITU would address these western countries dumping traffic on the countries internet connection. Like western companies are full of über-rich, doped up, anarchist hackers shoving youtubes like a DDOS of filth straight through the pipes into the minds of simple, naive, law abiding but curious Africans. When I answered them that an essential property of the internet was that you only got send what you requested, or acknowledged what you wanted to have (except for a Denial of Service attack), I didn't receive a positive response from the country. It also didn't help that I said it was only fair that they paid for their internet connection just like everybody else did and that they were free to not pay and disconnect from the internet. Great thing was that many nations in the room did agree with me.

In Geneva, where I was to enable the likes of Amazon, TomTom, Garmin and Apple to work as their own mobile telco (more on this later), a representative of an Arab nation stated that if the world would have adopted X.25 as the dominant protocol we now wouldn't have all this trouble with hackers and spam. (this isn't correct and we wouldn't have an internet equivalent either... but anyways) At an OECD meeting a couple of years ago Mauro Sentinelli, then deputy Chairman of the GSMA still argued against the internet's way of Peering an Transit, even calling for an increase in cost if traffic crossed a border. ETNO and the GSMA are still arguing against it, but when it comes to internet interconnection they come with no viable alternative.

So all in all, there are dinosaurs, they are arguing against extinction and consequently against the horrors of mammals and their despicable ways. This too shal pass.

Pissing off the Peering Guru's.

This is one of the most hilarious threads on Gigaom for a long while. Richard Bennett (a guy who writes anything you pay him for) tried to bring paid peering into the net neutrality debate. It seems everybody is weighing in: Vijay Gill (Google), Patrick Gilmore (Akamai), Richard Steenbergen (nLayer) etc.

http://gigaom.com/2009/11/22/how-video-is-changing-the-internet/

Andrew Odlyzko should also have a look as his MINTS institute is given a snide remark as well.

All of it seems to have been the result of Bill Norton writing as Dr. Peering
http://drpeering.net/a/Ask_DrPeering/Entries/2009/11/5_Paid_Peering_and_Net_Neutrality.html

I respected Bill alot, but this piece is just off the mark. There seems no basis for it whatsoever.

and of course the obligatory link to my Peering and Transit introduction.

Update: CircleID also weighs in with: Dr. Peering commits malpractice on Net Neutrality.
http://www.circleid.com/posts/dr_peering_commits_malpractice_on_net_neutrality/

(Video) How the internet works, what peering is and what exchanges are

Vincent Rais, a mega-uber value reader pointed me to the topic of this article. Euro-IX, the European Internet Exchange Association held a competition for a movie that explains how the internet works and what the role of an Internet Exchange Point is and how peering works. The movie that was the result, is really good and much recommended if you ever need to explain it yourself, or need to understand it. (it comes with subtitles too) If you want to continue with your education, have a look at my explanation of peering and transit over at Ars Technica. (or have a look at the dr. Peering site)

Basic truths about broadband speeds (reaction to Kevin Walsh on GigaOm)

On GigaOm Kevin Walsh has written down some basic truths about broadband, as he sees them. He sees a big problem with politicians wanting the wrong things when it comes to guarantees on bandwidth speeds. As he says:

Many believe that broadband service providers selling, say, a 5Mbps service should be required to set aside the same amount of capacity in order to fulfill that implicit service-level agreement (SLA). In other words, if you pay for 5Mbps, it’s there when you need it. But the reality is that networks, just like hotels and airplanes, are almost always oversubscribed — the owners of these assets sell more capacity than they have available.

Unfortunately this article messes things up just as badly as the politicians criticized. I reacted in the comments and post the comment here too. There are the important elements that need considering.

1. The speed of the line from the end-user to the local aggregation point (switch, cable head-end). DSL and wireless technologies are particularly crappy, as the speed the end-user can have is a function of the distance the end-user is from the DSLAM or the antenna. Unfortunately there are still telco’s that sell up to 8mbit or up to 20mbit subscriptions that can only attain 4-8mbit/s because of distance limitations. The really nasty one’s try to upsell the customer to a top tier 20mbit/s line where only 4mbit is achievable and so a 4mbit/s subscription would have sufficed
2. The speeds that can attained between 6pm and 10pm and the speeds that can be attained between 2am and 6am. These can be limited by oversubscription on:

• a. the local segment (cable and wireless) and
• b. on the ISP’s WAN
• c. from the ISP to the rest of the world

Oversubscription on the local segment is a fact of life on cable and wireless networks. It is a shared medium. This should be clear to end-users. It is not bad, it is a fact of life. It’s effect is that between 6pm and 10pm the speeds can be erratic. between 2am and 6am the listed speeds can quite often be attained.

Oversubscription on the WAN is part of the problem you’re describing above. Oversubscription on the WAN is not an economic fact, it is a result of crappy network planning. Oversubscription on the WAN can be completely unnoticed by the end-user if the network operator builds enough bandwidth into it’s WAN. If the network owner and the ISP are the same entity, this shouldn’t be a problem. With traffic growing 50% per year proper network management dictates that an oversupply of bandwidth is necessary anyways. Statistics from the AMS-IX in Amsterdam show that peak traffic is about 50% higher than average and three times higher than the bottom. So next year your average is the same as today’s peak and in 2.5 years even the bottom is at today’s peak. WAN Bandwidth is a problem in some countries like the UK and the USA where the costs of backhaul to and from smaller communities are extremely high because of regulatory and/or competitive problems. Mind you, technical and cost limitations are often not important here, as the costs of installing faster equipment is often not prohibitively high. (DWDM, 10Gbit/s ethernet etc) This also means that you don’t have to build your network in a fashion where everyone can achieve max speeds at the exact same moment. Just carefully planning it. Like the highway system, where we don’t expect all car drivers in the US to show up at the Brooklyn Bridge at the same moment (or to start driving at the same moment at all, regardless of location).

The costs of traffic from the ISP to the rest of the world is governed by the economic laws of peering and transit. For an explanation see my article on Ars Technica. Whether enough is available to the end-user is dependent upon how easy it is for an ISP to get peerings with the most important networks (Google, Microsoft, Yahoo, Akamai etc) and the local costs of transit. Many developing nations find that their biggest problem lie here:

• The national incumbent monopolizes transit traffic and charges outrages amounts for it.
• No local internet exhanges to keep local traffic local.
• No possibilities for local peerings with Google, Microsoft, Yahoo etc meaning that the transit link gets hit harder.) 

Amsterdam, London, New York are places with low costs for transit ($4/mbit/s/month) and many peering opportunities, so any network operating there should be able to get enough traffic for their end-users. Dave Farber once mentioned that traffic costs were only between 1%-5% of a subscription.
So, to conclude:

• Politicians are right to complain when listed speeds on the local loop cannot be attained because of distance problems. Providers of DSL and wireless should be put in the doghouse for this. The should inform their customers properly of what speeds can really be achieved.
• Cable networks and wireless networks could be required to publish the mean and median speeds users can attain between 6pm and 10pm.
• Problems on the WAN and on the interconnect to the rest of the world are either a result of bad investing in backhaul or because of regulatory and competition problems. If that is the case the ISP should inform its customers of the situation, explain why this is the case and show how it deals with distributing a scarce resource among all the users. A good example is the Plusnet DSL network in the UK who are very clear on how they prioritize network traffic between different classes of customers.

(Mobile) termination rates may end your career

I have been quite critical on "termination charges". One reaction I received to my previous post via e-mail was quite eye-opening.

I have a friend, he was a member of the board of the regulator in XXXX. He ‘was’ because next day after regulator presented decision to lower MTRs, parliament (instead approving this decision) voted to change the CEO and the board. He was a member of dispute resolution commission. While resolving an ordinary dispute one of the sides started to influence him. Finally some people were trying to shut him. That’s more or less realistic picture of regulatory environment in developing country.

As a Dutchman I don't know what corruption is. It doesn't really exist here as far as I know. Maybe I'm blind, but we're doing pretty well according to Transparency International and World Audit Corruption. However, most countries are fighting a 2 TRILLION dollar industry (services (fixed and mobile)and equipment), when they want to change the rules to make sure that their country benefits from (mobile) telecommunications. To see some recent examples look for instance to these postings by Steve Song about telecoms in Africa, or at Russia aiming to ban foreign VoIP. Benefiting often means more for the same money, or more for less money and this is perceived as a loss by the local telecommunications companies.

You know, it's an increase in telecommunications usage that benefits economies, not an increase in telecommunications revenues, but that is awfully easy to say from the Northern bit of Europe

A better calculation of the value of an internet exchange

Bill Norton, dr. Peering these days, has made a calculation of the value of an internet exchange . You may remember a similar article written by me a while ago. My calculation was back of an envelope type. Bill has a more scientifically sound calculation and a better list of things you need to account for. The numbers aren't too different: AMS-IX saves the industry roughly 25 million a year. Definitely worth a read and a great site to learn about peering and transit.

The value of an internet exchange (roughly)

An internet exchange generates value for the market parties connected to it and to the wider community. The components of this value are:

1. the value of transit traffic saved for the ISP's and telco's via the exchange
   
2. the value of transit traffic saved via direct peerings, without the IX being in the middle, in the collocation facilities where the IX is present. (also known as private peerings)
3. Increase in quality of traffic exchanged through more direct connections
4. Presence of multiple transit providers generates competition on price and quality of transit connection
5. The benefits will be passed on to business and communities  and that will generate a multiplier effect.

The first one is the easiest to calculate. For instance AMS-IX is generating more than 600 Gbit/s per second every day. Transit is at  $10 per mbit/s/month according to Telegeography, but at $4 according to friends who attended the Global Peering Forum  in the Dominican Republic. The benefit of peering is between 28.8 million and 72 million each year. With AMS-IX having a 9 million euro budget, it's clear that the members of AMS-IX benefit more from it than it costs them. Euro-IX stats show that in August 2008 total traffic exchanged was at 1.765Gbit/s. The total value of internet exchanges is therefore at least 86 million a year. Amsterdam boasts the lowest transit prices in the world, therefore the benefits easily exceed that. 

The second one is much harder to calculate. There are no reliable estimates of how much traffic is passing through private peerings at peering point locations. LINX  tried it a couple of years ago, but they stopped. Their last guestimate was that 25% of traffic didn't pass the IX. 

Quality is even harder to calculate in monetary terms. I'm not going to put a value at it :-)

Transit prices have dropped fastest and deepest in places where internet exchanges were established and were succesful. When the NDIX started in 2001 the costs of some connections dropped by 50% straight from the start. Traffic then was still well above the 500 euro/mbit/month even at major exchanges. 

Multiplier effects. Money not spend on transit can be used for more profitable purposes. A typical multiplier is between 2 and 3. 

With a rough calculation as the one above, the value of an internet exchange like AMS-IX is easily above 100 million. The value of Euro-IX members can be above 500 million

Fighting over peering and transit

Scott Woolley , writing for Forbes.com , has written some excellent articles on peering and transit and the fights that Cogent got itself into in recent times. It offers great illustration of my explanation of Peering and Transit at Ars Technica.

Specifically I want to single out:
The day the web went dead - about the fight between Sprint and Cogent. Nice numbers are that Sprint started a fight over 0.004% of its revenue.
Metadata: Internet Innards - shows that peering is about power not morality
Telecom Knockout - On Cogent, its boss mr. Schaeffer and the fight with Telia

It really illustrates that the Peering and Transit market is very competitive and generally will come up with a good solution without governments intervening. (why do you think that most telco's don't want to see the voice business go that way? Telco's love government regulation. It has strenghtened the status quo in the voice business)

A great bonus but not peering and transit related is an overview of the money in the business:
Blown to Bits - on a digital world where all communications can be converted into generic bits and shipped over the internet for less. Here are the juiciest profit pools to drain (U.S. figures only). 


Thanks to Niels for the tip!

How the internet works: Peering and Transit

A while ago I wrote an article here on Peering and Transit and Ars Technica picked it up and wanted to publish it on their site. I reworked it for them and now here it is.  Unfortunately I missed that it had been published for a couple of days, but still cool to see how many people have read it. Please follow the link here:
http://arstechnica.com/guides/other/peering-and-transit.ars#

Draft: Explanation of Peering and Transit

I've written an explanation of Peering and Transit. Which is available in PDF in draft. I would love to receive comments on it from anyone who is interested. My main questions are: Did I cover all angles, is it readable, is it structured well and does it need anything else? Please send your comments to the e-mail address in the paper.

You can find the paper here:

UPDATE: now available on Ars Technica

http://arstechnica.com/guides/other/peering-and-transit.ars

Mobile Terminating Access tariffs to go to 1 cent in 2012

08-05-2007 The presentations of the Encore workshop are available. They all argue forcibly in favor of diminishing or abolishing MTA-tariffs. For those of you who want to know about Peering and Transit as the alternative model, see my draft explanation.

Reuters last week reported that the EU will dramatically cut Mobile Terminating Access to a level of 1-2 cent per minute. " "The logic of the recommendation would be that by 2012 the incentive for keeping fixed termination rates and mobile termination rates would go," the Commission official said." I had missed this, but today this was confirmed at a workshop organised by Encore in The Hague. An official working for one of the EU regulators said 1-1.5 cents would be the goal of the Commission.

There is a great deal of logic behind this number. Currently the termination rates vary from 2 cents in Cyprus to 16 cents in Italy. Many countries are now forcing rates down to about 6 or 6 cents. Which is still well above cost according to ARCEP who are of the opinion that current costs are 3-4 cents and 2.5 cents is what their models predict the cost will be in 2010. So cost can come down dramatically without dropping below costs in the current Long Range Incremental Costs models.

The Commission wants to be forceful and will therefore not shy away from a statement. It cannot state a number that regulators already envisage. The start for the Commission will be the current MTA-tariff of Cyprus. It will not follow the gradual glidepaths of regulators. It doesn't want 2.5 cents by 2020, but it will want it next year or the year after. Bij 2012 this will need to be at 1 cent, as this is where mobile to fixed and fixed-fixed MTA-tariffs are at. Anything higher is not a proper statement.

The Commission can do this because there is no proper controlling force of the Commission. A recommendation will work as a regulation in the work of most regulators. If the regulator comes to the Commission with a higher MTA-tariff, the Commission will refer to its recommendation and the MTA-tariff of 2.5 cents. It will then start the serious doubts procedure, causing all sorts of political trouble for the national regulator while making the Commission look all harmonizing and consumerfriendly. So this is a lose-lose situation for the national regulator.

The Commission may have won part of the roaming battle, but it didn't succeed fully, because it wanted a directive and therefore had to agree to some changes in order to get the support from Vodafone.... I mean the UK. By doing a Recommendation the Commission may save itself the trouble of listening to the operators (countries) protest in all kinds of EU Council meetings. The Commission will look benign and any regulator not following the guidelines will look incompetent.

I don't belief the Commission will force Bill and Keep on the market. It will hope that by bringing the MTA-tariff's to the same level as fixed-fixed the market itself will choose to abolish MTA's all together.