Recently in Economics Category

Think you're too busy to blog? Think again. Or just ask your boss. After more than 100,000 miles in coach class this year (so far), my backbone may be aching, but the IP backbone market is as agile and dynamic as ever. Sales opportunities abound, but to take advantage, you'd better be savvy, and just a little cagey.

So, as our gleaming 777 departs Kuala Lumpur, I'll just relax in my fully-reclined, ultra-deluxe coach seat and tell you what this globetrotting sales guy has seen, heard and figured out.

1. Large eyeball networks (5 million+ subscribers) are selling paid peering to the largest content providers.
2. There are big price reductions in IP transit all over eastern Europe - now close to parity with western Europe.

New York.--Senator Robert Bulkley, of Ohio, has made a proposal which is certainly worth considering.

It is as clear as daylight that, to bring about any sort of recovery, somebody must start some new sort of business or some extension of an old business.

It is also clear that nobody is in sight right now who has any notion of doing that — at least not in time to do this country any good as a depression cure.

There is one business which is a public business but is also a private one. This is the road-building business. The Government pays for the roads and hires the contractors. But the roads are built usually by private contractors and with materials furnished by private manufacturers.

If there is one thing needed in this country now, in view of the development of the automobile, it is express highways running east and west and north and south. Why, therefore, cannot the Government go into the business of building these highways?

Tough Times for Local Exchange Carriers

This week, the headlines seem to be full of fresh doom and gloom for wireline carriers, who employ people in every congressional district across America. Sooner or later, someone is going to call for Congress to tap some of the hundreds of billions in 2009 economic stimulus to help the LECs through troubled times, save lots of jobs, and preserve the way we do business in our critical last-mile communications infrastructure.

Is this wise? Is there a better way?

The Internet is in for interesting times. Previously, I wrote about the engineering issues and about the policy issues facing us over the next five years. But there is at least one large issue still lurking. Most of you will not be surprised to learn that almost all of these issues are outgrowths of a single factor: money. The core of the Internet still doesn't have a sustainable business model.

Many people are getting rich on the Internet, and almost none of them are spending money to keep the interconnection infrastructure (the "Inter" in "Internet") growing and expanding. Look at it from a massively oversimplified perspective: Google make their money from the advertising they sell to search audiences. Comcast make their money by offering TV and Internet access on their local cable infrastructure. Amazon make money selling books and other stuff (including servers and storage space). Most datacenter companies make their money selling space and power inside of their buildings. Spammers make money filling up your inbox with useless crap. Organized crime makes money by launching attacks against profitable companies if they don't pay extortion. DNS squatters make money registering thousands (or millions) of domain names and sitting on them until someone else is willing to pay. And almost none of this helps the core of the Internet.

Look to the wholesale carriers if you want to see an income statement wasteland. Level 3 lost $1.1b last year. They lost $120m in the most recent quarter alone. Cogent is thrilled because they reported a tiny, tiny positive net income last quarter on top of a yearly loss of $30m in 2007. Global crossing lost $300m in 2007 and $88m in the last quarter they're reporting, which doesn't include much of the recent downturn. Other wholesale networks are in the same boat. Dan Golding suggested that it's more important to look at net cash flows rather tha income, but the result is pretty much the same: almost no one is making any money. The only wholesalers who do make money make it on other service offerings: wireless service, metro Ethernet services, VPNs, local phone service, video services and so on. Are there sustainable Internet backbone business models? Does anyone have one?

An open market for buying and selling IPv4 Addresses is coming. Soon. As I wrote previously, IANA is running out of unallocated IPv4 addresses. Estimates vary, but by 2010 (or 2012 at the latest) the world will be out of unallocated IPv4 addresses.

Sometimes it is hard for the general public to understand what this might mean. Essentially, after 2010 or so, if you want to start a new company and get connected to the Internet or just are growing and have more devices that need to have IP addresses, things won't be the same as they are now. Right now what happens is that you go to ARIN, if you're in North America and document your need for IP addresses, you pay a modest administrative fee, and then they allocate them to you. If you grow and you need more, you document how you've used up the ones that you have, and they give you more of them.

All of this assumes that you want your own IP addresses that are not tied to any particular provider (this is an important point that we'll get back to). But even if you get your IP addresses from some provider, they have to get them from somewhere. If you want to be reachable from the Internet, you need an IP address—an IPv4 IP address in particular. And very shortly those are going to get much harder to get.

So let's talk about what happens after the IPv4 addresses are all "used up."

These are the signs of the apocalypse: A worldwide earthquake, the sun ceasing to emit visible light, cats and dogs living together in harmony, and Cogent (AS174) depeering another AS. At least one of these happened earlier this week.

At about 10:00 UTC on Tuesday (6am EDT), Cogent depeered a couple of smaller, UK-based ISPs without notice. This was apparently intentional and due to a review of existing peers and whether they meet peering policies. Does this mean that Cogent is becoming more like its larger competitors that it so enjoys taunting? I'll take a look at who was depeered and speculate on why.

This is the first in a two-part post about what happened to Cogent on Tuesday, April 24, 2007. Later that day, Cogent suffered what appeared to be a fairly widespread serious routing problem. Looking at that in a bit more detail will be a subject for part 2.

Today, for the first time, the Amsterdam Internet Exchange surpassed 200 Gigabits per second across its switch fabric. AMS-IX was already the biggest public Internet exchange on the planet, but this is impressive growth.

While AMS-IX hits 200 Gb/s on a single Internet Exchange in a single city, Tier 1 Research pointed out a few weeks ago that it was a big deal that Equinix recently hit an aggregate of 100Gb/s across all of their exchanges—including Ashburn, San Jose, Chicago, Dallas, Singapore and so on. So why is AMS-IX so much bigger than everyone else?

Many of the recent great tales of peering, depeering and and repeering involve Cogent (AS174) eventually. This one starts there. Cogent and Sprint (AS1239) established a direct adjacency this week. You may be able to see the little "1239" next to directly connected to the "174" in the picture off to the side. This is big news for a number of reasons, among them:

• Both are big networks
• Sprint is tremendously exclusive in its peering and would almost certainly not offer Settlement Free Interconnection to a network of Cogent's ilk.
• Cogent is a tremendously cheap (let's say "cost conscious") network that would never pay a cent more than they had to for anything

What remains are a whole lot of questions, some of which we have ready answers for and others of which require moles and informants inside the relevant networks. Among the questions are: What kind of peering is it? For what prefixes? In what geographies? Is anyone paying anyone else? Who lost the traffic? Why did Sprint and Cogent do this?