[10828] in Commercialization & Privatization of the Internet
Re: Settlements
daemon@ATHENA.MIT.EDU (Einar Stefferud)
Fri Mar 11 10:22:43 1994
To: Dan Lynch <dlynch@interop.com>
Cc: com-priv <com-priv@psi.com>
In-Reply-To: Your message of "06 Mar 1994 12:11:09 PST."
Reply-To: Stef@nma.com
From: Einar Stefferud <Stef@nma.com>
Date: Thu, 10 Mar 1994 22:01:35 -0800
Hi Dan -- I have been tracking this settlements discussion for a long
time now, and I find that everyone is missing the real key piece of
the puzzle.
Settlement in the internet is needed if, and only if, the service
providers decide to load their revenue collection entirely on traffic
in one direction, and make no charge for traffic in the opposite
direction. In this case, if I collect for incoming traffic, and hand
it off to you for delivery, you will stand around with your hand out
asking for a share of my revenue.
If all service providers charge for both directions in such a way as
to not care which way the traffic might be unbalanced at the "CIX"
exchange point, then something magic occurs --
THEY DON'T CARE ABOUT THE DIFFERENCE!
And, no settlement is needed/desired/useful/...
This is starting to happen with various EMail Service Providers. I
have actually been explaining all this to the US-NMTS-IG folks for
some time now. If they want to make a profit and also be connected to
the Internet, they better charge for delivery of mail they receive
from the internet, cause they sure aren't going to get any settlement
money from the Internet originators! Those Internet originators all
know they already paid for both sending/receiving in their IP
connection fees, and they don't see any reason to pay a commercial
EMAil service provider again, just because that service provider is
not smart enough to figure out how to charge for receiving;-)!
The big problem in hand is that there are among us a number of TELCO
oriented folks who believe for some reason that there is no way to
organize things to avoid the need for settlement. Well, I have news...
All we have to do is declare that settlement will not be required of
anyone exchanging traffic with another service provider at the NAP or
the CIX, and thus force all service providers to price in such a way
that they don't care about the traffic direction differentials, and
then we will achieve the miracle state of not needing any settlements,
just like we now have in the current Internet.
Now, I have heard that this model will disallow resale, and thus we
really need to go to byte counting or packet counting and settlement.
Well, this is also just not so. We already have transit networks that
charge flat fees for connecting regionals, like NEARNET to the CIX
(ANS is doing this for a profit now!)
The basic Internet Business model is incredibly simple and direct.
No Service Provider can go it alone, and must exchange traffic with
other service providers, or suffer a big loss of service value by
virtue of not being able to offer broad reachability to its customers.
Hence, all service providers must limit themselves to selling
connection service between their own customers and the mystical
"middle" where all the service providers exchange traffic without
settlement.
I actually believe at this point that the lack of settlement is what
holds the Internet together, because as things now work, no one can go
it alone, and must therefore cooperate with all other service
providers in order to maximize their own service values. The value of
the service is directly proportional to the number of reachable other
ends. Thus, every new connection, regardless of which service
provider made the sale, adds value to all the other service providers
services, if they all cooperate to provide the desired global
reachability.
As I see it, this cooperative centripetal force will wither and die if
we adopt settlement methods which would allow certain service
providers to load all charges on traffic in only one direction, and
thus force other service providers to act as collection agencies for
their revenues. This, IMMHO, would lead to destruction of the
Internet as we know it.
I look at this in terms of the concept of keeping local problems from
becoming network problems. If every service provider sees its revenue
collection processes as a local problem, and we do not let local
revenue collection become a network problem, then we can avoid loading
revenue collection work onto the global network, which would raise
costs and prices all around. Lets keep local problems local, and only
allow real network problems be solved by the network.
As I see it, the lack of wasted effort on settlement allows Internet
service to be competively lower in cost, compared to alternatives with
settlement, and it offers greater connectivity too, whcih means lower
prices and higher value than is available with settlement based
services.
What I cannot see is how to use settlement to beat what we have now!
Cheers...\Stef
>From your message 6 Mar 1994 12:11:09 -0800:
}
} Reply to: Settlements
}Let me play angel's advocate here... (Already seems to be an over supply of
}devil's advocates on the planet, eh?)
}
}
}Miles wrote earlier regarding NAPs:
}
}>iv. what should the rules be
}
}>something pretty much like the CIX rules: anyone can interconnect, and
}>everyone has to accept traffic from everyone else without settlements
}
}Now what is so darn wrong with the idea of "settlements"? To a simple minded
}person (such as myself) Settlements just mean that if you and I are doing
}similar work for the world of "customers" out there and "I" end up doing some
}of that work for "your" customer, then you ought to pay me something for doing
}part of the job. I can see a theoretical argument of "If the nature of the
}business is that we both (all) end up doing an equal amount of work for each
}other, then, heck, why bother with all the record keeping". Is that the
}underlying reason for the agurment for their being no settlements?
}
}My simple minded view of how the Internet has evolved thus far is that all the
}"carriers" (of IP traffic) are acting like the former AT&T in the "US only"
}marketplace. They "owned" the customer end to end. So who cared about
}internal settlements? The local phone providers just took all the traffic and
}sent it out to its destination and as long as it stayed inside the AT&T system
}there as no reason to do settlements from a P&L standpoint for the company.
}(I'm sure the individual state tax authorities forced them to break it out
}along those lines for individual P&Ls along those lines...) Well, the current
}IP providers are acting like there is no "outside world" to them. Gee, it just
}ain't so.
}
}What about the following idea: What is missing here is a true "IXC" for IP
}traffic. A "carrier" whose only purpose was to take all "local" traffic and
}forward it to the appropriate "local" destination? Forgetting who might own
}such an entity and forgetting the perhaps idiotic "Star" topology that that
}business model might look like, isn't that the place where settlements would
}need to happen?
}
}Why has not such an entity come into existence? Or, has it and I have not
}noticed?
}
}Dan
