Volume Five of an Annual Handbook on the Commercial Internet's Business, Technology and Management Issues

An Anthology of Recent Articles from The COOK Report Published this year with 12 pages of quantitative charts and tables courtesy TeleGeography 2000

The COOK Report Annual Handbooks provide vital reference material in the form of an indexed handbook that can assist Internet technical and investment strategists. For Volume 5, Battle for Cyberspace, all the articles from the March 1999 COOK Report through the February 2000 issue have been reorganized into topics that unfold and overlap over time. A detailed nine page index makes it easier to track the complex developments portrayed in this 392 page study. The five sections of Battle for Cyberspace cover the following five critical issues:

• IP Delivery Technology pp. 8 - 97

• Infrastructure for the Delivery of IP pp. 98 - 198

• Regulatory Issues pp. 199 -246

• Some Engineering Issues pp. 247 - 272

• Who Will Control the Internet? pp. 273 - 378

  This year the report includes the following charts and tables reprinted with permission from TeleGeography's almanac TeleGeography 2000. They are:

  Figure I Fiber Optic System Cost Trends

  Figure II: Major VoIP Clearinghouse Networks and Standards

  Figure III: A Guide to Next Generation VoIP Standards, Protocols, and Vendor Forums

  Figure IV: The Geopolitical Locus of Internet Infrastructure

  Figure V: Countries with International Telephone Services Competition

  Figure VI: The Top 20 International Carriers

  Figure VII: The Top U.S. International Carriers

  Figure VIII: The Top 25 International Internet Routes, 1999

  Figure IX: The Top 25 International Internet Hub Cities, 1999

  Figure X: Bandwidth Market Matrix

  Figure XI: Western Europeıs Fiber Frenzy

  For existing subscribers, the annual handbook has become a means of organizing all the material from past newsletters for reference and review. For many others, it serves as a valuable introduction to the COOK Report. The cost is $695 a PDF (electronic) copy. Double sided GBC bound copies cost $995.

  The rest of this message contains:

  1. State of the Internet 2000 -- The complete preface to our study -- a revised and expanded version of our article from the February 2000 COOK Report

  2. The complete Table of Contents of the full report.

  3. Description of the Handbook's Audience

  4. Pricing and Ordering Information

  Battle for Cyberspace: How Technical and Political Decisions Can Affect Your Internet Venture

  The State of the Internet 2000

  At the beginning of the new millennium the Internet is globally triumphant. Blindly embraced by politicians who do not understand it, the Internet is touted as the engine that will power the economy of the new century. The lover's embrace by the rich and powerful has helped to make it a fad which is increasingly in control of the stock market. Internet companies are too often valued not out of sound understanding of their business models and cash flow dynamics but because they are Internet companies. The Internet has emerged in the 1990s as perhaps the supreme "disruptive" technology in the sense popularized by Clayton Christensen in his 1997 book The Innovatorıs Dilemma.

  Christensen found that "disruptive" technologies generally "under perform established products in mainstream markets," however they are generally cheaper and simpler to use than the sustaining technologies that they ultimately dethrone. Examined from a slightly different perspective, "disruptive technologies give customers more than they currently need or are willing to pay for. [Source is TeleGeography 2000 . Review follows.] This is one reason why such technologies are usually commercialized first by customers serving niche markets such as data networks or CLECs."

  Because "disruptive" technologies bring to market a such a radically different value proposition than was here-to-fore available, those practitioners of the older sustaining technologies find themselves unable to quickly adjust their business models and infrastructure to compete head-to-head with the new "disruptive" technologies. They may also be constrained by the very service models which have made them essential to their customers.

  To name just two examples central to the Internetıs triumph as a disruptive network: in the last three years, we have gone from the ancient sustaining wisdom that telecom networks must be intelligent at the center, to the new paradigm demanded by the Internet--that the intelligent devices at the edge of the network must find nothing in the middle that gets in the way of communication between them. Also we have traveled from the certainty of knowledge that publishing is an activity whereby elite gate keepers package knowledge for the masses to a world where every computer owner can become a publisher. In this new "disruptive," Internet-driven world the old realities of our once comfortable industrial world are turned sideways if not inside out. The trail that has been blazed by the new media and mirrored by the old media, is simply to hop on the bandwidth wagon, and hype processes that are not well understood yet. Jeff Bezos, the CEO of Amazon.com, a company that has yet to report a profit, becomes Time magazineıs "Man of the Year."

  This report will give an in depth look at reasons for the success of the disruptive Internet. We have technology analysts, e-commerce analysts and legal experts bringing their respective expertise to bear as they tell their separate stories of who is winning and who is losing. What we lack is a look at the larger picture of how the interaction of these areas will determine success and failure over the longer term.

  This report will also examine in depth certain critical areas of technology change. As it does so, it will show how the efforts of pre- Internet telecom entities to channel and shape the legal and political control of this technology no longer fit the competitive multiple protocol environment under which these entities must work. The processes developed to service the pre-Internet, circuit switched, telecommunications systems simply do not afford policy makers any way to deal fairly and harmoniously with Internet disruptions. There are no longer appropriate pigeonholes and regulatory boxes that can sustain the old way of doing things. Democracy and technology no longer mix. If technology is to be consistent with public values, the public must understand the technology and be able to move from that understanding to a grasp of the stakes.

  Understanding the stakes is difficult. Technology itself is increasingly complex. Point A does not always lead to Point B, even if Event C occurs. The impact of a new technology on the system is increasingly difficult to judge. Consequently we are likely to find that many of the assumptions on the basis of which policy has been developed over decades are no longer valid. For example this report will show that the buyer's market for bandwidth is filled the potential for financial peril as well as profit. And it will show that the obscure debates over end-to-end network transparency can exert transformative influence over how the internet is organized.

  Ultimately, as the system grows sufficiently complex with fewer and fewer people competent or even able to direct its course, some may ask when does chaos set in and take control? Or when does Internet coordination become merely a series of panic stricken interventions where the "coordinators" lurch from one crises to the next while trying to keep all the "vested" interests in their same positions of dominance? Already technology that our political leaders do not understand is driving the formation of public policy. Thus, democratic values independent of the technology are no longer the primary public policy goals. These are additional "disruptive" effects of the triumphant Internet.

  Those who dare to assume the role of enterprise strategist in the midst of these changes must understand that their successful stewardship will depend on their grasp not only of what Gilder calls the ascendant technologies. They must also develop at least two other skill sets. One is an understanding that, as Lessig has shown so well, the success and visibility of the Internet has brought to it a level of attention where the legislators and the regulators will impact it whether the rest of us like it or not. [For Lessig's Code: and Other Laws of Cyberspace see http://cookreport.com/lessigbook.shtml ]

  The other is a skill set that will help strategists to evaluate the stakes behind the questions of what will become the engineering agenda for the Internet. Compromises have been made in network management that can spell trouble further down the road. To scale network growth and cope with available IPv4 numbers, design decisions compromising end-to-end connectivity were made in the early 1990s. As the long IETF discussion published in the February 2000 COOK Report [and reprinted pp. 259-272 below] shows, there is a fallout from these decisions. The fallout is an incipient battle over how some of the intelligent edge devices of the network will communicate through the center to their intelligent counterparts at the opposite edges. The approaches taken now as to early implementation versus delay and revision of IPv6 will impact the diversity of the infrastructure of the future Internet. Arcane but very important debates like these will determine whether issues of control over end-to-end uniformity and network transparency take priority over everything else. Will time spent toward these ends mean that other more critical engineering concerns are ignored.? A feared consequence is that the Internetıs ability to continue to scale may be endangered.

  Technology Changes

  The year just ended saw a continuation of the bandwidth revolution begun by the real take off of WDM technologies in 1997. New developments in DWDM (Dense Wave Division Multiplexing) and optical switching have further multiplied the bandwidth available from a global binge of fiber deployment. A revolutionary drop in the cost of data storage combined with increased network speeds is making it possible to deliver data across a wide area network more quickly and more cost effectively than across the bus on the motherboard of a single computer. These changes made the dream of the network becoming the computer - a dream that was first articulated earlier in the decade -seem likely to become true. They also made possible the rise of a new application service provider industry.

  The year also saw the full flowering of new global telecom providers built on the inexpensive infrastructure made possible by the new technology. Qwest, Level 3, Metromedia, Williams, Enron, Global Telesystems, Global Crossing, Next Link, Teleglobe, and Above Net to varying degrees are all examples of these new telecom giants. While Teleglobe has been around for a number of years in a rather different form, and Williams is a reincarnation of an earlier venture, all of these new players with the exception of Metromedia have been profiled within the pages of the COOK Report. Questions of interconnection and peering are still critical. Equinixıs neutral Internet Business Exchanges to be built globally under contract with Bechtel will be the most high profile model for fitting the new backbone players together and enabling cost effective interconnection. As bandwidth consumption and fiber deployment soar the purchase of bandwidth has become especially tricky. Prices of bandwidth bought in bulk over long periods of time are plummeting and options of purchase are increasing. (See Figure I Fiber Optic Cost Trends and Figure X Bandwidth Market Matrix from TeleGeography 2000 on pages 2. and 161.) It is a buyer's market, but a dangerous one, as AboveNet found out when 14 months ago it paid over 8 million dollars for a 25 year IRU on a trans Atlantic STM-1 only to see the price of such an IRU plummet to less than 3 million a year later. Options are available for those who make this kind of "mistake." MetroMedia Fiber Network (MMFN) bought AboveNet last year assuring it of a direct and affordable supply of bandwidth. As David Isenberg pointed out in late December, according to MMFN's president, "a DS3 from the telco costs $3,000 a month, and a comparable MMFN fiber costs about $5,000. But the fiber can be lit at OC-12 - [a speed that is]14 times faster than DS3 - for $500 more per month (assuming 10-year depreciation). This works out to about $400 per DS3 per month." The lesson is that as new companies are built on shifting assets and technology, agile fast moving players will find many options. But, as the market solidifies, such options won't last indefinitely.

  An important new business involving the sale of surplus bandwidth at exchanges is beginning to emerge. We learned about RateXchange in a phone conversation with Ross Mayfield its CEO on December 30. In New York and Los Angeles Mayfield is running what he calls The Real-Time Bandwidth eXchange. He says that RTBX is a switch-based exchange that facilitates the entire transaction of bandwidth between interconnected carriers. Benefits include significantly lower transaction costs, anonymous trade, immediate delivery, and guarantee of payment. He seeks to create a win-win situation where an ISP with a temporary bandwidth surplus can sell bandwidth to an ISP with a shortage. His ultimate goal is to commoditize trading in bandwidth by means of the sale of contracts for future delivery.

  When Web based interfaces for creating in almost-real-time single- wavelength circuits between two points become common, Mayfield, and by then many other players, intend to have created the infrastructure to make this possible. Given that the Internet for the past few years has been in a blind race to make enough bandwidth available to meet huge demands, this technology will be likely to give a welcome rationality to this marketplace. For the first time it should offer a means of efficiently and quickly bringing available bandwidth into balance with demand, and thus allow venture entrepreneurs to build new infrastructure where it will be used profitably

  As the February COOK Report's lead article on the state of wireless shows, we have many new developments in wireless reaching their maturity and pulling the whole structure towards more ubiquitous, always-on connectivity and applications. Wireless, becoming digital in 1999, became also broadband. Almost all the kinds, number and varieties of activities conducted via the wired Internet are now beginning to be carried out on the Internet in wireless form. This vast growth of wireless infrastructure has fed on itself to lead to a continued explosion of net use and net traffic. Large growth in cable and DSL connectivity in 1999 also contributed to the increase in traffic and in the number of always-on connections.

  In 1999 the Internet reached a critical mass where every player in commerce and business had to have a presence. It became unthinkable not to have an Internet strategy. The growth in internet participation fed on itself and made possible business models which came to subsume every part of human economic activity. These changes mean that we are looking at a telecom world in which the old standards of evaluation fail us.

  Technology Changes Divide Management into Irreconcilable Camps

  The revolution has given us two opposed ways of thinking about and acting to achieve network organization. One may be described as the bellhead intelligent network and the other as the nethead stupid net work. [See http://www.tmdenton.com/netheads3.htm and p.206 below.] In the first intelligence resides in expensive complex smart switches in the center of the telephone network linking stupid edge device telephones. In the second fat bit pipes linked by idiot savant routers connect intelligent computers on end user desks. The intelligent ³bellhead² network is generally organized to be run from the top down by an extremely rigid hierarchy. The business model is a monopolist and feudal one with the lord of the manor ensconced in his hilltop castle.

  The "nethead" architecture is organized through the creation of structure by cooperating autonomous groups. In addition to being important mental constructs, both architectures are now grounded in billions of dollars of competing and not generally compatible infrastructures. These competing infrastructures are the foundations on which telecommunications, electronic commerce and individual access to vast knowledge will be determined in the new century. The older infrastructure (the bellhead) is inherently more subject to vertical integration and organization. In the bellhead environment, vertical, centralized, and rigidly-controlled hierarchies are used to enable a single centrally determined and centrally priced palette of communication services, while the newer nethead companies more often tend to be organized horizontally as companies whose market strength is in the delivery of one or more layers of the protocol stack.

  This report proposes the outlines of a new business model structure for identifying and understanding Internet players who will prosper and ride the disruptive wave successfully. Growth areas in nethead oriented companies are for specialists in bandwidth, interconnection, content hosting, application outsourcing, email. A player here is either an infrastructure-providing specialist, or one who coordinates and manages technology specialties horizontally to provide services to end users. At the transport, infrastructure- providing, level you have the continued growth of new telecom greenfield players such as Level 3, Williams and GTS to name but three. These companies are taking advantage of new technology and new market conditions to grow from nothing into billion dollar plus companies in only two or three years although the long term judgment of the market is not yet in as to their appropriate valuation.

  Opposed to this new disruptive Internet business model is the old solid and stable vertically integrated telecom model followed in the United States by the ILECs. ATT, with its attempt to buy control of the cable industry to have a foundation from which to deliver all telecom services, fits into the same category. MCI WorldCom with its attempt to become one of the biggest world wide integrated phone companies by acquiring Sprint also exhibits the telephone headed business strategy of a gigantic vertical integrator of dissimilar technologies and services. By the same token the AOL Time Warner merger repsesents the old industrial age vertically integrated model of the marriage of content and a delivery mechanism for the content.

  The Two Approaches to Slug it Out in 2000

  We find that one battle of the year 2000 will be between the horizontal versus vertically integrated business models. The horizontal model that is TCP/IP-based over gigabit or 10 gig Ethernet over fiber - a stupid network with smart peripheries where new low cost services can be cheaply and quickly inter connected like lego blocks. Internet players tend not to be vertically integrated. Instead they are bandwidth and transport players like Williams, Enron, Global Telesystems or end user aggregations of services like MindSpring, Earthlink, or AOL that run over someone else's infrastructure.

  Disruptive internet companies are nimble and quick compared to the older players like WorldCom that are still driven by empire building in search of elusive economies of scale. In a vertically integrated company, you may think you can cut costs by eliminating duplicative services, but instead you have a management nightmare of complex systems where glitches can mushroom into multiple week outages like MCIıs frame relay collapse during the summer of 99. Or ATT as it attempts to build what it sees as the "network of the future" out of CATV policy and infrastructure. These players tend to see the Internet in terms of what has come before - in other words in terms of what is already familiar to them. What has gone before is regional feudal monopolies, based on exclusive land-based rights and exclusive land-based responsibilities overseen by public regulators enforcing a social benefit/social cost analysis. And it well may be that this model may be with us longer than we would like. We should not think it can be so easily replaced, or that such replacement would have only good consequences.

  Can the old vertically integrated intelligent network players compete? Or should they have some kind of protected quid-pro-quo status as the baseline common carrier? It will be much more difficult when wireless means cannibalization of their local loop T-1 circuit income rather than new income. Look for them to engage in regulatory plays like ICANN.

  The horizontally organized players can see the disruptions coming much more clearly, push the development envelope better, and achieve economies of scale by specializing in transport services, or storage services or application outsourcing. The vertical integration of MFS into the realm of its telephone company operators was what made the Network Access Points (NAPs) fail with WorldCom in the 1996 -1997 period. (Some maintain that with a carrier running the NAP, it was then put in the counter productive position of competing with its own customers.)

  In contrast horizontal aggregation of services will enable Equinixıs neutral exchange points. Vertical integration is needed to make all the pieces of the intelligent bellhead network operate and to pay for relatively few and very expensive centralized switches. To make vertical integration work, one needs to control as much of the telecom environment in which one operates as possible. Even so some astute observers point out that, as the Internet industry continues to grow, even the horizontally oriented Internet companies are likely to make vertical market plays if they are sufficiently cash wealthy and driven to expand market share. We must strive for educational processes that will make clear to regulators and the public alike what economic and policy consequences will flow from the two different approaches to the market.

  Ignored Perils of Scalability and Architecture

  The plug and play nature of internet interoperability means that the over all network can be quite hierarchical, because there is room for many companies of many different sizes. Consequently, the management of each company can be quite flat and and be able to respond rapidly to changing conditions. Internet interoperability encourages specialization and rapid technology development because the specialized pieces will fit together and work together. However the Internet is now set to begin paying penalties for its success. The triumph of IP in global telecom has made legacy companies believe it is critical to their futures to dominate the implementation of IPv6 in order to preserve illusory and unattainable uniformity for their goal of continuing in central control of network operations.

  Let us summarize the argument we have just made. The Internet is having a disruptive impact in three areas of global importance. First, disruption in global commerce. As trade of goods and services migrate to internet locations, then individual economic power is derived from one's position within and from one's subtle understanding of the new infrastructure.

  Second, disruption in the restructuring of global telecommunication services to accommodate internet requirements and efficiencies. As we have pointed out, the Internet is enabling new infrastructure that can provide all manner of telecommunication services at a tiny fraction of prior costs.

  Third, disruption by the revolution of storage technology which re- enforces and amplifies the plummeting costs of bandwidth provision. As a result, some computers will expand into configurations which look to them something like local intranets, with extended storage lodged on the internet rather than inside the case, because in some situations, external internet storage will be cheaper and safer than local storage options. This trend toward external internet storage may shape the net into the global respository for information and knowledge. While the Internet was originally designed to be decentralized and not subject to single points of failure or control, its current commercial success makes today's internet a target for desperate and daring stratagems to both obtain ownership wealth and the privileges and prerogatives of control, containment, restriction, and punishment.

  Control Points: Ephemeral or Real?

  One view of how services in the new telecom world will be delivered is by an architecture of an idealized Internet where TCP /IP will always be able to be sent from end-to-end. Because of a series of compromises involving private address numbers, corporations now sit behind firewalls that demand the imposition of many translation devices. The bellheads see these devices (NAT boxes) as obstacles to the imposition of a centrally controlled communication path like IPv6. The netheads don't see any of the bellhead's reasons for concern. They are happy to use multiple protocols and bridges over otherwise non interoperable network links. The nethead's outlook focuses on extensibility while the bellheads, through trying to influence the roll out of IPv6, focus on control.

  ICANN which has garnered most of its support from bellheaded legacy organizations, has waged a generally successful campaign to sell itself to the press. The major press, having nothing other than ICANN's sound bytes from which to claim a clue, generally has no idea that anything is amiss. ICANN meanwhile is determined to error on the side of control concluding that it has the ability to enforce a uniform roll out for Pv6.

  The two sides, one riding a disruptive technology and the other trying to extend the lifespan of the old sustaining technologies, sit in a hostile face off as they roll out competing business plans for the 'converged' future of voice and data. But the Cook Report argues that the netheads and the bellheads are fighting about dominance and control issues, when there is emerging evidence that they must, instead, focus on scaling and inter operability issues. We are very sensitive to Sean Doran's concerns about scaling of network architecture and routing which will enable the Internet to cope with the coming onslaught of broadband soon to be generated by the increasing numbers of intelligent devices in homes and small businesses at the edge of the network. [See pages 150 - 152 below.] But in the current competitive environment this is very little talked about.

  Therefore one must consider whether the Internet technical community while doing battle over the presumed uniformity necessary for IPv6 is actually depriving itself of the time and effort needed to face more intractable problems of scaling, including protocol diversity. Up to this point the Internet has scaled by a series of kludges like the use of CIDR and RFC 1597 assignment of numbers for private intranets. These are kludges that leave no one happy. While the Internet is not likely to suddenly fall off a cliff, if these issues are not attended to, performance is likely to get uglier and less reliable.

  Thus we predict that what is otherwise an arcane dispute among network engineers is likely to become a basis for an operational strategy attuned to the structure, economics, and philosophy of the vertically integrated telcos of the majority of the planet. These conflicting issues meet head on in the distribution of IPv6 and over ICANN which has placed itself in a position from which it could attempt to coordinate the implementation in an effort to provide the uniformity that the bellheads want and believe they need in order to stabilize their world.

  We find that a vertically integrated market strategy is usually telco operated and at odds with the horizontally oriented and more cooperative internet market strategy. However in the current chaotic period of expansion and emphasis on building market share, these categories do not always hold. For the changes that we have chronicled in the COOK Report for the past eight years are focused on building market share as well as in the creation of new, successful businesses based on openings provided by the "disruptive" technology. When this happens, a business like 3Com may mature to a point where the MBAs looking at the balance sheets and stock prices begin to drive things more than the engineers.

  As one astute observer confided to us: "vertical integration has become the way that everyone is trying to rule the Internet economy, and I have seen very specific presentations from 3 Com and others saying explicitly that this is what they are hoping to do. It's the way to maximize shareholder value, but at the expense of an Internet that works well and that is user-friendly (by which I mean users that can innovate, not just click mouses). Similarly, I believe that weıre past the nethead vs bellhead debate into something far scarier, which is where netheads and bellheads both realize that theyıre going to have to integrate their networks. Moreover they may be committing to doing so even when they know that they donıt have time to agree about big chunks of the end result. In other words, while the PSTN may be getting dumber, intelligence is being injected into the Internet in some interesting and unexpected ways."

  Under such conditions amazingly powerful technology will almost certainly run into snaffus originating with kludges in protocol design and IP numbering made in the first years of the take off of the commercial internet. When this happens more than web site performance will suffer. Also the profits of those companies which have marched forward fueled by nothing but blind faith in the continuing scalability and robustness of the Internet will take severe hits.

  Alternatives?

  So are there alternatives? Ed Gerck who has participated in some of these debates has some wise suggestions in a long IETF discussion reprinted in the February 2000 COOK Report. Gerck advocates that the battle should not be thought of as either the uniform rollout of IPv6 or the failure of IPv6 and thus being fated to live with a network with some hosts blocked by firewalls or NAT boxes. There is a third way marked by diverse protocols that can inter operate.

  When we asked him for further comment he replied "I saw no counter-argument raised to it ‹ rather, it fell like an eye-opener to the reality that Nature is based on diversity. Those that believe in an uniform Internet as the only way to achieve end-to-end security are actually still locked in the network paradigm of the 70's where network administration dictated orders to the entire network, by design. So, they will most naturally fight a multiple-protocol Internet, because they cannot intellectually cope with it."

  "However, in the Internet paradigm of the 90ıs, now truly as networks of private networks in a progression over 30 years as catalogued by Stef, [Einar Stefferud] we already have multiple protocols in coexistence at various levels ‹ what matters, so we have learned, is not that there must be one unique protocol at every place and time, but that different protocols, at different places, at different times, and doing different things are indeed able to work together when the objectives are the same. And this, quite revealingly for the success of the Internet IMO, is how we humans prefer to work together, how commerce thrives and how we can enrich each otherıs living experience."

  "So, communication protocols such as IPv6 must not be based on an excluding model, where they must kill any other protocol, but on an including model where interfaces are provided for backward and forward compatibility. Otherwise, even if IPv6 would be adopted by force on 90% of the Internet ‹ this would still leave out 10% (which is projected at 40 million end-users in 2000) and would immediately raise questions about IPv7, IPv8 and so on. The only way to address the backward- and forward-looking questions without requiring the whole world to change standards at whatever cost at whatever time, is to provide for interoperation."

  "Thus, that is why I wrote that tools for IPv4/IPv6 interoperation will be needed .... and valued, including NATs as a fundamental building block ‹ even though they began as a stumbling block in another context," Gerck concluded.

  Consequently, one must weigh whether the Internet technical community may be actually depriving itself of the time and effort needed to face more intractable problems of scaling, including protocol diversity. Those who would pretend to do large scale strategic planning in the midst of the internet revolution had better assimilate the lessons of Larry Lessigıs Code and Other Laws of Cyberspace. As the Internet moves into the legal and political arena the question for analysts to ponder is not a naïve belief in the unregulatability of the Internet. They need a much clearer understanding that the operation and impact of the Internet can be determined by the legal system, by the way in which its dominant protocols are coded, by the architectural environment in which it operates and by the local customs that determine what behavior is socially and commercially ethical and acceptable.

  Gerckıs statement about the need for interoperability tools for IPv4 and IPv6 is a good summary of why Lessig's seemingly arcane issue of network architecture and control is politically very important. For in Lessigıs language, it offers yet another example of how the technical decisions that change the shape of Internet architecture will indeed render it more subject to legal and regulatory control.

  The "disruptive" Internet is in the midst of what looks to be a general triumph. During our eight years of reporting on the growth of the commercial Internet, the COOK Report has developed a unique perspective that synthesizes technology issues with their operational and engineering counterparts. We believe that synthesis of these intricate processes as described in detail in IP Everywhere, falls outside the scope of more specialized analysts. We also believe that those who become familiar with these complex developments will be able to formulate more successful business strategies. For the first time the technology is likely to be as much affected by policy decisions of network design and global regulation as by the older unregulated Internet frontier mentality which drove the mad rush to add users, scale the network, and increase market share. Winning players must take into account the daily onslaught of new technology. They must also make the right judgments about the governance and standards wars, and the rapid shift in market economics. The winners will be those who get the right answers to this complex mix of questions.

  Gordon Cook January 24, 2000

  TITLE, CONTENTS AND SECTION SUMMARIES

  Battle for Cyberspace contains the full text of 48 articles appearing in the COOK Report on Internet between March 1999 and February 2000. They are organized into five sections and presented in chronological order within each section. They are also indexed (about 1200 subjects) on pages 378 - 387 of the report. Each section is introduced by an executive summary (written especially for this volume) that explains where and how the material contained in that section fits into the "bigger picture" . The articles in each section are also preceded by their individual executive summaries. The report is structured to guide the reader, through a series of gradual steps starting with the summary and leading to increased levels of detailed description of the way in which the complex systems that make up the Internet fit together and interoperate.

  Battle For Cyberspace: How Technical and Political Decisions Can Affect Your Internet Venture

  Accurate Assessment of State of the Internet 2000 Depends on Mixture of Technology, Network Engineering Issues and Governance Efforts

  Volume Five of an Annual Handbook on the Commercial Internet's Business, Technology and Management Issues

  Contents

  Battle For Cyberspace: How Technical and Political Decisions Can Affect Your Internet Venture 1

  Figure I: Fiber Optic System Cost Trends 2

  A Brief Review of TeleGeography 2000 7

  Part One: IP Delivery Technology 8

  Executive Summary Part One 9

  Wireless Reaches Internet Critical Mass Internet Use Jumps to Mobile Platforms as Spread of Digital Infrastructure Enhances Wireless Capabilities 15

  Ciena Builds End-to-End Optical Transport Lightera Units Replace SONET AD Muxs Via Smart Signaling & Routing Bandwidth Management 22

  Technology Choices for Running IP Over Glass Nortel VP Describes Business Model Conditions Dictating Selection of Four Possible Combinations: IP & Glass, IP, ATM, & Glass, IP, ATM SONET & Glass, IP SONET & Glass 33

  Juniper M40 Out Performs Cisco as New Terabit Routers Start to Come on Stream --Tony Li on Juniper Design & Issues of Intelligent Traffic Management at Core of Stupid Internet 38

  MCI's vBNS Service Explores QoS Rick Wilder Reports on Testing of Juniper M40s and on Future of Bandwidth Intensive Applications 46

  Traffic Engineering & Multi-terabit Routers Ross Callon, IronBridge Chief Architect, Looks at QoS, Standards, & Engineering Issues of Next Gen Routers 53

  Next Generation DSL Takes Advantage of Intelligently Managed Transport Layer -- Elastic Networks Uses Edge Transport Technology to Create a Very Flexible Very Powerful ETHERLOOP that Adapts to Network and User Demands 74

  Extending the Reach of IP Telephony Francois Menard Explains Player's Strategies Describes Wide Range of Market of Approaches & Protocol Development Designed to Leverage Differing Infrastructures 84

  Figure II: Major VoIP Clearinghouse Networks and Standards 89

  Figure III: A Guide to Next Generation VoIP Standards, Protocols, and Vendor Forums 90

  Wither Telephony in IP Dominated World IPtel Engineers Debate Merits of Innovation Versus Predictability in IP Telephony Protocol Design 91

  Part Two: Infrastructure for Delievery of IP 98

  Executive Summary 99

  Figure IV: The Geopolitical Locus of Internet Infrastructure 104

  Figure V: Countries with International Telephone Services Competition 104

  Figure VI: The Top 20 International Carriers 106

  Figure VII: The Top U.S. International Carriers 107

  Figure VIII: The Top 25 International Internet Routes, 1999 108

  Figure IX: The Top 25 International Internet Hub Cities, 1999 109

  AboveNet Aggregates Content and ISPs at Data Centers Connected by Big Pipes -- Uses Private Interconnects to Reach Rest of Net - Pledges No Competition with Customers 110

  NEXTLINK Builds National Infrastructure Via LMDS & IP over Glass Integrates Voice and IP Communication for Small and Mid Sized Business John Curran Develops Data Network Strategy 121

  New Business Model for All IP Network -- Enron's IP Over Fiber Network Alternative Way To Deliver High Bandwidth Web Content -- Overlay of Public Internet Has Major QoS Implications 128

  Williams Network Builds Generic Customer Configurable Optical Network Foundation -- Purchase of Single Wave Allows Carriers to Plug and Play with Their Higher Level Services 137

  Global TeleSystems Emerges as Pan European IP & DWDM Carrier's Carrier -- Ebone's IP Know How & Hermes Railtel Fiber Yield Largest European Greenfield Network -- Critical Issues & Future Concerns 144

  Teleglobe Builds Global Fiber & Satellite IP Network Using Alcatel Optics on Both Trans Oceanic and land Based Fiber, It Focuses on International Services and Internet Connection for new European Competitive Players 153

  Figure X: Bandwidth Market Matrix 161

  Figure XI: Western Europeıs Fiber Frenzy 162

  Equinix Creating Neutral Exchange Points Adelson Traces Trend Toward Horizontal Outsourcing Equinix Business Model Offers Incubator for Coordination and Interconnection Between Providers of ISP Services 164

  Global Survey: Packet Networks & Fiber Infrastructure Racing to Meet Demand -- Farooq Hussain Discusses Policy Issues and Business Models Impacting Convergence and Relationship of Regulation to Innovation 172

  Role of Satellite Bandwidth in Delivery of Content Across the Global Internet PanAmSat Discussion Explores Economics of Content Delivery, Decreases in Cost of Receiving Equipment Make Delivery of Same Data to Many Different Places Competitive with Fiber 182

  Business Model of a Third World ISP Dileep Argawal Explains the Dynamics of Building World Link, Nepal's Largest ISP 191

  How to Obtain Low Cost Dark Fiber for Schools and Libraries While US Uses a Tax to Buy Service Year after Year, Canadian Neighborhoods Build Critical Infrastructure 195

  Sean Donelan on Breaking into National Cost Free Peered Status 197

  NANOG Attempts to Facilitate Peering Through Tools Developed by Bill Norton 198

  Part Three: Regulatory Issues 199

  Executive Summary 200

  Regulator's Dilemma -- Cable vs Internet & Vertical vs Horizontal Organizing Paradigms for Equinix, VCs and ICANN 203

  Netheads vs Bellheads: Best Policy Paper Since Isenberg's Stupid Network 206

  The Story Behind Third Party Access to Cable Networks in Canada 207

  Standards and the ITU Business Model 216

  Parsing FCC's Reciprocal Comp Ruling Telecom Attorneys and Policy Makers Attempt to Make Sense Out of FCC's Section 251 Ruling 218

  Does Barshefsky Sacrifice ISP Interests in WTO on Behalf of E-Commerce Gain for IBM? Bureau of National Affairs Reports that Negotiators Willing to Regulate Internet as Basic Telecom Service 224

  National Security Emergency Preparedness Implications of Internet Technologies 225

  Farber Moves to FCC as Chief Technologist 226

  Two Views of Electronic Commerce Eyeballs Versus the Cluetrain Manifesto TV with a "Buy" Button or Self Organizing Markets? 227

  Venture Capital and the Internet Jerry Colonna of Flat Iron Partners Describes the Process Predicts a Stabile Growth Path & Spread of VCs to Europe 233

  Nortel: A Survey of Changing Strategy The Journey from Smart to Stupid Networks Where Bay, Avici and Other Technologies Fit in Next Generation and in Legacy Networks 239

  Part Four: Some Engineering Issues 247

  Executive Summary 248

  NANOG Discussion Explores QoS Participants Seek to Define What Is Hype and What is Real Ask Whether Bandwidth May be Used as QoS Tool? 249

  Web Caching, Multicast Discussion on NANOG 255

  IETF Debates IPv6 Implementation and End- to-End Architectural Transparency NAT Boxes and Firewalls Seen by Some as Kludges to Be Eliminated and by others as Symbols of Healthy Diversity 259

  Part Five: Who Will Control the Internet? 273

  Executive Summary 274

  Secret Meeting Shows ICANN - IBM Dependence Two IBM VPs in Presence of Four Internet Dignitaries Set Stage for NSI's September Capitulation to ICANN ICANN Emerges as IBM - US Gov't Brokered Internet Equivalent of WTO - Lessig Shows Internet as Potential Victim of Public Private Manipulation 278

  Paris DNSO Draft Gathers Wide Support ORSC Protest Stops Sole Source ICANN Solicitation PR Firm Hired in Face of Continued Board Secrecy 301

  ICANN Presses Forward: Broke but Buoyed by NTIA & GIP Intent to Salvage It 308

  ICANN Implements Regulatory Model IETF and IP Registries Wisely Ignore Roberts as Domain Names Forces Jockey for Position 312

  At War for the Future of the Internet ICANN Ignores its By-Laws, Sweeps Opponents Aside, Claims Control of all DNS and Prepares for Showdown With NSI Under Guise of Ending NSI Monopoly -- Actions Create Regulatory Body Designed to Make Internet Safe for Content Control, Legacy Technology and Fortune 500 E-commerce 318

  Dave Farber's Views on ICANN's Origins 329

  ICANN Faces Scrutiny of Congress ISOC ICANN Connection Foretold in Landweber Plan for ISOC's Control of DNS - NSI Will Not Play ICANN's Game 332

  A Short ICANN Summary 338

  ASO Proposals Bring IP Allocations Under ICANN Regime into Focus -- ETSI and ETNO Seek ICANN Mandated Role in IPv6 Allocation EuroISPA Telecom Director Explains Potential Impact of ICANN Regional IP Address Registry Policies on ISPs 339

  ISOC's ICANN Coalition Widens Its Control Attempts to Regulate DNS - Invites Trademark, IP, ITU, EC, E-Commerce Interests to Expand ICANN Scope -- ICANN Allows Property Rights & Telco Regulatory Interests to Structure SOs to Ensure Their Maximum Economic Advantage -- Fund Raising Emails and Analysis of ISOC Coalition Building Raise Doubts About Legitimacy of White House Approved Plan for Industry Self Regulation 344

  ICANN - NSI Domain Name Accord Creates Joint Monopoly: Registrants Deprived of Most Rights -- Symbiotic Relationship Expected to Free NSI of Liability for Acting as Agent of ICANN Which Can't Be Sued 368

  Index 378

  Contents 387

  THE AUDIENCE FOR THE HANDBOOK

  Within the national Internet service provider community, " Battle for Cyberspace" is intended to enable strategists understand the complexities facing their engineering and operations staff. Among smaller ISPs it should serve as a tool to bring owner-operators, who are busy 18 hours a day ordering lines, installing them and servicing their customers, up to speed on the changes going on in the environment in which they must operate. LECs and other phone companies will also find it useful. Familiarity with the issues discussed within the Handbook will provide their corporate MIS people and strategists with a valuable knowledge base of the issues facing the survival of their companies

  However, since these infrastructure issues are also critical to the continued growth and success of the Internet industry, this "Handbook" is expected to be a tool for use by those in the banking and investment community. If those in the financial community understand the changing technical and power relationships in the industry, they will be able to improve the quality of their investment decision making. Finally the Handbook should also be useful to corporate strategic planners who will be advising their companies' decision making in Internet applications for vertical industry markets.

  PRICES AND HOW TO ORDER BATTLE FOR CYBERSPACE

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  This Annual Handbook is NOT provided as part of a regular subscription to the COOK Report.

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