partial summary of Cook Report Findings on where Internet Policy could be headed policy headed
2001-07-10 22:53:05
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The COOK Report on Internet September 2001 (Vol. 10, No. 6)
(c) COOK Network Consultants
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CONTENTS Full text of executive summary is also available at
http://cookreport.com/10.06.shtml
The Internet's Dilemma: What Good Is the Stupid Network If the Other
Guys Own It?
Future to Offer Access to a Public Highway Grid or Exile to Corporate
Controlled Walled Gardens and OS'?
An Analysis by Gordon Cook pp. 1-7
Broadband in Canada
Enabling Local Control of Local Infrastructure
A Pragmatic Regulatory Approach to Enabling Community Fiber Networks
and Commercial Interconnection
by Francois Menard pp. 8 - 12
Executive
Summary:
The Internet's Dilemma: What Good Is the Stupid Network If the Other
Guys Own It?
Future to Offer Access to a Public Highway Grid or Exile to Corporate
Controlled Walled Gardens and OS'?
We take a detailed look at how most all of telecom companies except
for the ILECs fell off the precipice. We conclude that without
intelligent public policy designed to act as a counterweight to the
ongoing consolidation of the "free-market" the AOL/Time Warner
"Walled Garden" business model of the Internet may well become
dominant. We need to make understanding and emulating the Canadian
approach to enabling the building of community owned fiber networks a
high priority. We find and conclude that:
1. Classic industrial age business cycle has overtaken information
age infrastructure build and brought with it oversupply and slump.
2. Matched against big business practice and philosophy, edge control
is no control. Edge control has no defensive capability and thus is
ripe for takeover and top down control.
3. Vertical top down control, ownership and integration of networks
squeezes liquidity up and out of the entire system.
4. We need to understand fully the implications different economic
models for the Internet. Is the Internet to be understood as composed
of thousands and hundreds of thousands of local private enterprises
and municipalities at every layer of the global network who operate
under local democratic regulation, or is it to be seen as a cartel of
12 or so intertwined global media and distribution corporations who
control and staff their own nominal regulators at ICANN and WTO.
5. While in an abstract sense the distinction is still quite clear,
the failure of 96 Telecom Reform Act blurred the Nethead vs. Bellhead
split. It can be said that we now have mainly companies with varied
degrees of bell headedness.
6. The technologies which once defined the ideologies are themselves
converging both in applicability and in price. This convergence is
another driver of the above "blurring". Everyone is using a varied
mix of technologies that were formally understood as particularly
Netheaded or Bellheaded.
7. The Nethead ideologues were like settlers of the early American
frontier west. And when the railroads pushed through and established
towns and sufficient presence and support infrastructure and
enforcement personnel, the frontier was brought to heel.
8. The regulatory playing field of ILEC versus CLEC that was created
by the 1996 telecom act was in fact tilted on behalf of the ILECs and
the inability of the FCC to enforce opening of local markets to
competition.
9. Netheaded, green field, would be first movers borrowed vast sums
for their fiber build outs driven by flawed estimates of bandwidth
growth which, if accurate, would have given a successful first mover
great payoffs. The result looks like a glut and the inability of the
would be first mover to get enough cash flow to pay their debts.
10.The ILECs out lobbied, outspent and outsmarted the builders of the
Greenfield fiber plays and the Internet
11. There will be a fiber fire sale. The questions are who will be
allowed to buy? Will there be *any* public interest test, any
monopoly or anti-trust test or regulation, any access or control or
preference given to the localities in whose earth the fiber runs, and
whose residents and business and institutions are the logical first
choice to benefit from this fire sale?
12. The traditional American model has been that of local and
individual ownership and local and individual responsibility for the
physical necessities of life. Our telecommunication policy has
abandoned these ideals.
13. Yet we define telecommunication as a necessity and then through
the Schools and Libraries corporation part or the universal service
fund extract money from the community for use by distant corporations
14. We need a national debate on problems of media concentration and
distribution channel monopoly versus the feasibility of community
owned and operated alternative infrastructure.
15. The struggle is aimed at control a technology that is most
fertile if uncontrolled. The way things are headed the struggle for
control may kill the "golden goose."
16. Are we to have networks with end to end connectivity that we can
use in ways that we see fit rather than have our usage subject to
the rules of a central authority? Can a "private vehicle/highway"
model survive alongside the "railroad model?'
Broadband in Canada
Enabling Local Control of Local Infrastructure
A Pragmatic Regulatory Approach to Enabling Community Fiber Networks
and Commercial Interconnection pp. 8-12
We publish an essay by Francois Menard. What Menard convincingly
shows is that, given intelligent use of regulatory power,
discriminatory interconnections and unfairly priced rights of way do
not have to remain undue barriers to broadband. Menard demonstrates
how communities could force the aggregation of demand onto the same
infrastructure. He illustrates why doing so will be a necessary
precondition for any sound business case for fiber to the business or
fiber to the home. While local loop monopoly regulations have
forced aggregation of demand in a way that sustains the PSTN. He
shows how demand aggregation can be achieved on a fiber optic
infrastructure without requiring that a utility be given a monopoly
on services.
He argues that the necessary preconditions for broadband can only be
truly realized when end-users can directly influence what equipment
is attached to the infrastructure, which requires that dedicated
infrastructure, such as customers owning rights to specific fiber
optic strands within the same cable. He doesn't discount the use of
wave division multiplexing, frequency division multiplexing, time or
code division multiple access or even optical packet switching
equipment, but warns that any use of such technology constitutes what
he calls "service-defining bottleneck facilities". He argues that
owners of networks must mandate that physical open access be provided
at the location of every such service-defining bottleneck facility.
This is necessary, he suggests so as to enable other carriers to
bypass such bottleneck facility, in order not to have imposed on them
a certain type of service or business model. Regulators of the
facilities based competition model are missing this point and are
relying on what in fact constitutes discriminatory interconnections.
Just as it is seen as a proper and accepted role of government at
local, regional and national level to set the rules for building and
use of physical highways and the clover leafs by which they
interconnect, so should government, from the community upward,
determine the rules for building and interconnection of fiber based
packet data networks. While the current system protects the
interests of ILEC stockholders, it may only bring broadband "walled
gardens" to most customers several decades from now. Menard contends
that regulators are too busy with working the bugs out of regulations
that are supposed to enable local competition in telephony.
Consequently, they are unaware that they have the ability to ensure
that we do not miss out on the opportunity, feasible today, of
bringing broadband to everyone. What Menard describes is the
technology and regulatory approach that will enable communities to
extend fiber to government, schools and business, and then to homes
immediately.
The architecture that Menard advocates would bring the fiber strand
from the individual business or residence to the nearest carrier
neutral co-location site where the owner of the strand could choose
what services he or she wished to be connected to. The use of new
technology such as high density ribbon cables and patch panels,
micro-tubing and the ability to blow fiber through conduits would
enable cost effective build outs. Investigation is underway to
determine what the exact costs and best architectures are likely to
be. The point is that in Canada there is now a regulatory impasse
where CLECs have been given mandated access to unbundled network
elements at discounted prices while they build out their networks.
The discounts were to end within five years. However seeing that the
objectives are not being achieved, the regulators have extended the
discounts indefinitely - an act that deprives the CLECs of the very
incentive necessary to build competitive infrastructure. In this
essay Menard argues that it is time to throw out the current
approach, adopt well defined standards of interconnection and
encourage communities to act as referees of equal access to their
rights of way. [Note: The preceding text also appears as part of this
article's introduction.]
Two quotes from the essay: "What now appears to be needed from
telecommunications policy are regulations which will favor the
aggregation of end user demand onto a single fibre optic community
network. But regulations must also explicitly mandate the
disaggregation of services by enabling customer-owned physical-layer
equal access onto carrier-neutral facilities. In other words every
carrier can offer its own set of services while being unable to
prevent a competitor from offering a completely different set.
Furthermore, this regulation should call for municipalities to
provide for the support structures necessary for customer-owned fibre
optic strands under cost recovery principles similar to those of
other municipal infrastructures. It is to be expected that some
municipal administrations will be less interested than others in
venturing into providing telecommunications support structures.
Therefore it will be necessary for regulators to get an explicit
mandate from the government to be able to regulate how cities are to
be compensated when carriers are required to acquire rights of ways
and build their networks should the municipality not be willing to do
it."
Finally, we have written a more generalized set of findings based on his essay.
1. Broadband is an essential public utility. Access is only half
the broadband issue. The other half is end user (consumer choice) of
service model at the point of access.
2. The regulatory model for existing cable and copper last mile
loops was conceptually flawed and has failed enable any over build of
new technologies.
3. While regulated carrier competition has failed, however, private
local networks are being built by municipalities and local schools.
These local public infrastructure networks could become well placed
to provide service as a competitive market alternative to the current
monopoly telco and monopoly cable incumbents, particularly in areas
that the monopoly incumbents refuse to serve with high speed access,
or with choice.
4. When the broadband market fails because of monopoly, the local
communities have a duty to provide market alternatives to their
residents and businesses.
5. Canadian regulators are grappling with deployment and development
issues at least two generations ahead of the current American
telecommunications landscape.
6. To date Canadian school districts and municipalities have been
building their own fiber networks. To make the economic case for
fiber to the home Canadian municipalities will have to take adopt a
new model where the municipality no longer operates the network but
instead uses its ownership of rights of way to become an impartial
referee on behalf of equal access.
7. The ideal business, technical, and regulatory model places the
municipality in charge only of guaranteeing what it has always
guaranteed--public rights of way access and non-interference, and
regulating which services shall have access to the public Rights of
Way and under what terms, conditions and fees for use, including how
they must mutually assist and coordinate with each other. The
technology enables the city's responsibility for maintaining physical
equipment to be extremely limited, as would their billing for service
model.
8. As in all natural monopoly/limited distributor situations, the end
user cannot freely choose nor freely change distributor because the
distribution channels are either prohibitively capital intensive or
prohibitively spacially intensive. Therefore, the physical interface
to the consumer for these natural monopolies are best regulated and
coordinated by the local municipalities, as several hundred years of
time and experience in thousands of essential public utility contexts
have shown.
9. The ancient public-private contract of monopoly and public grant
of special easements and tax relief and tax funded public investment
given to private telco corporations for 100 year old technology does
not imply an eternal commitment by the public to support these same
corporations as exclusive beneficiaries of public tax funded relief
and assistance, when new technologies and new businesses develop
which can serve the public in better ways and at lower cost.
10. The 1996 regulatory model for encouraging market opening and
active infrastructure competition has failed. In Canada it has done
better, but not a lot better. And in hindsight we see that there is
no business case to be made for any permissive regulatory framework
that will effectively draw the ILECs into investing in full scale
residential broadband, much less broadband choice. It is too much in
the financial interest of the telcos and the cables to drag their
feet forever.
11. In Canada careful review of rights of way agreements will uncover
impacts on school and municipal networks that may be undesirable, as
well as finding that current RoW agreements favor incumbent telcos
and cables. RoW reviews should be comprehensively undertaken to
favor broadband competition, consumer access, and consumer choice and
municipal alternatives.
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