[11082] in Commercialization & Privatization of the Internet
Re: ANS and the CIX - have they really connected?
daemon@ATHENA.MIT.EDU (Karl Denninger)
Mon Mar 21 19:57:01 1994
From: karl@mcs.com (Karl Denninger)
To: gwh@crl.com (George Herbert)
Date: Sat, 19 Mar 1994 14:53:32 -0600 (CST)
Cc: karl@mcs.com, matthew@echo.com, com-priv@psi.com, cook@path.net,
fair@apple.com, stpeters@dawn.crd.ge.com, washburn@cix.org,
gwh@crl.com
In-Reply-To: <199403192011.AA14020@crl.crl.com> from "George Herbert" at Mar 19, 94 12:11:43 pm
> From: karl@mcs.com (Karl Denninger)
> >Note: There's some heat in here. My blood boils when I read posts from
> >people who are continually trying to devise a way around a voluntary
> >associative agreement!
>
> This is in some ways the crux of the problem. From the top down,
> CIX as it is was intended to be and appears to be a volountary
> associative agreement to keep settlements down. From the bottom up,
> as Matthew keeps pointing out (and Dick seconded) CIX has set
> itself up to be a cartel, with a buy-in level designed to prevent
> any small fry competitors from setting up in an entirely legitimate
> (i.e. guaranteed routing) manner.
"Small fry"? What do you call MCSNet? I posted before where we started
from! $5,000 and a dream! If that's not small fry I don't know what is.
This January we were able to afford to offer full CIX routing through our
membership. That check was written BY HAND on a <STARTER CHECK> from the
bank, and I signed it! Small fry enough for you?
> >Either you're for us or again' us. If the CIX goes away tomorrow you can
> >expect to be billed BY THE BYTE for your FTPs and email. DO YOU WANT THAT
> >to be the model of the Internet for the future? The RBOCs and ANS would
> >LOVE to be able to impose this. The rest of us think that idea sucks.
>
> Small providers who are barred entry based on a fixed membership fee
> but will have low traffic would benefit from such a settlement arrangement,
> Karl, as offensive as settlements are to most of us. Do you really want
> to form a crowd of anti-CIX small fry competitors who start lobbying
> congress to help ANS's model out?
Those "small fry competitors" had damn well better look at what ANS wants to
charge them BEFORE they start this. If they do, they will quickly discover
that the truth of the matter is that you can buy a connection from SPRINT
<AND> the CIX membership for what ANS wants to charge you for the connection
alone -- and have LOTS of money left! Further, ANS normally wants all that
money UP FRONT! You want to talk about barriers to entry? There's a HUGE
one. The <best> deal I could get from ANS was a <QUARTERLY> payment. Not
monthly, quarterly. Got an extra $20,000 laying around at start-up time
you don't need?
It really pisses me off when people go off on this tangent without doing
ANY investigation or validation of the facts. As someone who DID the
legwork, who DID price the alternatives, and who DID spend two months of my
life, 100% of the time, setting this thing up in what I believe to be the
most efficient way I find it highly dishonest and disingenuous that people
want to snark about the costs involved.
> >The CIX <DOES NOT> block this backdoor traffic, as MANY people can attest
> >to today who ARE cheating. However, INDIVIDUAL providers can choose to
> >block that traffic UNLESS you have a separate business arrangement with
> >each and every one of them.
>
> So why is it that the CIX has to officially stand its ground and not
> figure out some accomidation which will legitimize the "backdoor"
> small-provider traffic (which the backdoor people would probably
> love, even if their bills go up some) rather than insisting it's
> not officially covered or ok and then looking the other way?
I don't hear ANYONE standing their ground. I have yet to see ONE -- NOT
ONE -- single cogent proposal for the small provider that I, as a member,
could get behind or champion to the CIX board. IF and WHEN I see one I
will evaluate it and, if it has merit, get behind it. Those who want to
snark have a long way to go on this, and they can start by putting forth
their suggestions for people to look at and comment on.
All I hear is complaints about how "awful" that $10,000 fee is. You know
what? Its the best deal out there right now. Anyone who wants to try to
challenge this in Congress or on any other legal level is going to have to
deal with testimony from the likes of me that says, roughly, that I believe
my costs (AS THAT SACRED SMALL BUSINESSPERSON) would have been 5,000% HIGHER
had the CIX model not existed, and that in fact as a small businessperson
without the CIX I would have been effectively locked out of this market
entirely. Oops. There goes your Congressional action, and furthermore,
you could be found guilty of lying to Congress.
> >The CIX is the best thing to ever happen to interconnectivity. Flat-rate,
> >no settlement connectivity to over THIRTY other providers. Grouse all you
> >want, but nobody is going to do this for free, and nobody has YET come up
> >with a more efficient model to interconnect with that many network providers
> >on a peer-to-peer, everyone's an equal, basis.
>
> The CIX is the best thing to ever happen to national-level provider
> interconnectivity.
In a word, bullshit. MCSNet is not a national-level provider. We provide
access to Chicagoland. We have two locations here, soon to be three. We
have financed ourselves ENTIRELY through sales -- NO bank would come
anywhere near us, we have no SBA support, NOTHING. This company started
providing service a year ago with $5,000 in cash and a couple of Intel
machines for assets.
Now what was that again about the CIX not serving small provider interests?
Again -- go take this to Congress. I'll show up with balance sheets and
ledgers from Day #1 showing that the complaints are not only unfounded,
they are criminally perjurous. Careful with that fire; you might get
burned.
> It also is a nightmare for local area providers
> in relatively small areas. It essentially is saying that a certain
> sized market area (say Santa Cruz, CA) doesn't deserve to get relatively
> cheap internet access.
It certainly does NOT! Santa Cruz, CA, ALREADY HAS that access from
Netcom, which I will note, IS a CIX member.
Given the snarking on the net about their performance problems of late I
would suspect that a Bay Area/Santa Cruz competitor could make SEVERE
inroads on their business in very short order. I suggest that those who
wish to bitch give it a shot.
This is a <highly> competitive market in Chicago. There is an ANS direct
attach customer here who is competing with us. The marketplace will
validate which of our approaches is best, as it usually does.
I bet that anything in that part of CA would also be a lively market. Just
make damn sure you are technically competent before you start this, and
properly evaluate the business issues, or you WILL get resoundingly whupped,
as you should.
> Mr Kaufman can probably go national at about his
> current pricing levels and a little venture capital; despite everone's
> bitching about it, buying long distance leased lines (or frame entry
> points or...) is not very expensive and is getting cheaper. It's quite
> a bit cheaper than even most backdoor pipelines, so the costs will
> go down a bit as he gets bigger. The CIX model forces him to do that
> to be legitimate. Are you sure you want that? Does that make any sense?
I will note that a interstate T1 to San Jose, the CIX site, is about $3,000
a month. That's <$36,000> a YEAR! You want to bitch about barriers to
entry? Start with the telcos!
A 56kbps backlink pipe (or a frame-relay T1 with a 56kbps or even 128kbps CIR)
is next to useless if you have SLIP and PPP customers (ONE 14.4kbps link CAN
AND DOES saturate a 56kbps when compression is achieveable), and is completely
useless if you have leased-circuit customers. Thus, you are forced into the
T1 model, like it or not, the pricing that the Telcos charge for same, and the
realities of the equipment required to route and handle that line. Given that,
and the fact that you need, at a BARE minimum, about $5,000 worth of gear
to actually <use> that T1 (on each end) you're looking at a first-year
NON-CIX-RELATED cost of almost $50,000.
The extra $10,000 for guaranteed routing to CIX members and their direct
customers is less than a 20% uptick in that cost - and for that you get
routing services promised by ALL other CIX members AND their direct
customer bases! Note that I haven't even factored in an office, or staff
(someone has to get paid here to run this thing!) or any of the other license
and cost-of-doing-business issues (like phone lines and electricity) that you
MUST take into account. I suspect that if you do a "bare bones" thing the
CIX cost is less than 15% of your budget for Year #1, and less in future
years. In our case it shows up on the balance sheet, yes, but its hardly
a "barrier".
> The question is not whether CIX is the right model for large provider
> connectivity, and I don't think it ever was. The question is whether
> large providers are the whole market (obviously not) and whether CIX
> and its members pretending otherwise is being a problem (apparently).
I vehemently disagree.
> In addition to the question of how small providers can fit in, there are
> minor little issues like antitrust laws and things like that, which
> CIX is probably backing itself into a corner with. Which I don't want
> to see, for one, as I think CIX is basically a good thing.
>
> -george william herbert
> Speaking strictly for myself
Antitrust law requires overt collusion and/or restraint of trade. None of
that is taking place with the current CIX agreements. If you want to make
such a charge, you should be well prepared to support it.
Further, you've got another problem. As I've posted here MANY times
before, if people have problems with the CIX model or want to do something
competitive with it I'm game. Right here. I have the office and will work
on such a project. Note that NO ACTION has been taken against me for
suggesting such a thing. Restraint of trade? Collusion? Where?
I also note with amazement that all those who snark about the CIX costs
haven't come to me with proposals and discussion on this very issue. Could
it be that this is all just sour grapes because the CIX is a handy target,
and there is no real substance to any of it?
Until and unless someone can show me where real restraint of trade or
collusion has taken place, and NOT just off-hand commentary from a
"third-hand" source, I have to say I don't believe it. Certainly we've
had nothing but GOOD experiences since our membership funds were sent in.
Finally, the CIX is <THE> reason that MCSNet, <ONE OF THOSE SMALL
PROVIDERS> I hear being claimed is locked out of the market, is able to
exist. In other words, it has so drastically LOWERED the cost of entry to
this marketplace that there is NO other action that could even come close.
The "ANS" model would have been twice as expensive for us to buy into as
the CIX+SPRINT model, and that 100% increase in cost could not have possibly
been paid for. And yes, I will make that statement under oath if necessary;
I have the proposed contracts from ANS and the actual ones we signed for
Sprint and CIX service which solidly support that statement.
To those who want to snark: put your CONCRETE proposals up here for
inspection under full daylight. If there is heavy resistance, I bet I can
get another interchange point up and running here in Chicagoland in six
months. If not, I bet they can be implemented. Either way the "small fry"
wins, UNLESS the point of this exercise is simply to take cheap shots at
the highly successful interconnection strategy that has been undertaken by
both large and small carriers alike.
--
--
Karl Denninger (karl@MCS.COM) | MCSNet - Full Internet Connectivity (shell,
Modem: [+1 312 248-0900] | PPP, SLIP and more) in Chicago and 'burbs.
Voice/FAX: [+1 312 248-8649] | Email "info@mcs.com". MCSNet is a CIX member.
