[8606] in Commercialization & Privatization of the Internet
Al Weis to Steve Wolff Memo of 1/15/91 in context of CIX vs ANS Dispute
daemon@ATHENA.MIT.EDU (Gordon Cook)
Thu Nov 25 22:18:51 1993
From: cook@path.net (Gordon Cook)
Date: Thu, 25 Nov 1993 19:18:00 PST
To: com-priv@psi.com
Some readers have been accusing the CIX and actions of UUNET and PSI of
breaking the internet." In understanding just who was out to break WHOM I
think it would be helpful to turn to the historical documented record and take
a look at what Al Weis, CEO of ANS was telling Steve Wolf that *his* (Weis and
ANS's role would be.) What follows is a single section from my 35,000 word
history of the privatization of NSFnet from early 1990 to December 31 of last
year - published in the COOK Report on Internet -> NREN vol 1, number 10 & 11.
(The model of measured traffic with settlements payable to ANS that the CIX
was formed in reaction against is quite visible here.)
Weis had made it very clear that his priority was to give Congress a gigabit
NREN as soon as possible. It is interesting to observe that he was in effect
proposing to operate a privatized equivalent of NREN for the US government.
While he was getting almost 10 million a year in federal payments, this would
not be enough money to establish his goals.
What follows is the majority of a memo dated January 15, 1991 sent by Weis to
the NSF and telling the NSF no less than nine areas in which ANS would be
raising money to achieve its objectives. His first target was qualified
clients of the mid-level networks. He would detach these and attach them
directly to HIS backbone. What seems to be implicit in this objective is that
if he were as successful as he hoped the mid-levels would LOOSE the attachment
fees of the clients that he took. Loosing enough of these fees would push
many mid-levels to the point of inslovency. If this happened, the NSF
presumably would have to find more taxpayer money to shore up weakened
mid-levels or risk seeing the entire national network infrastructure it had
built collapse.
In view of ANS's agressive stance I am not at all surprised that PSI, UUNET
and CERFnet decided that they better get together to form the CIX and do it as
quickly as possible. Indeed Bill Schrader announced plans for the
implementation of the CIX in front of Al Weis at panel of actual or potential
NREN service providers that I chaired at OTA on Feb 14, 1991 - one month after
the delivery of the Memo from Weis to Wolff.
I invite readers of this list to look at ANS's intentions and judge for
themselves. The majority of the January 15 memo follows intersperced with my
comments. Numbers at the end of sentences refer to footnotes. I invite
anyone who has the complete text of the memo in electronic form to post it
here.
This material comes from the January - February 1993 combined issue of the
COOK Report on Internet -> NREN.
_________________________
ANS as Decision Maker for the NSF
It is likely that Wolff was beginning to realize the extent that the
NSF was only along for a ride in its new role of buying services
from it's privatized backbone provider when he received from Al
Weis a document called A Proposal to Establish a Structure and
Implementation Plan. On January 15 at 6:38 PM Weis sent a
slightly modified version of the above document to Jane
Caviness, Deputy Director of NSFnet. This document was released
to the author under FOIA.42
In a section called "Background" Weis sets out ANS' charter:
"ANS was formed to participate in enhancing the competitiveness
of the US in high performance computer networking by
privatizing and expanding the current national backbone
network serving the research and education community. . . . .
ANS expects to broaden the utilization of the network, make
available vital commercial services to the research and education
community, increase the speed and capability . . .[etc.] . . . . With
the formation of ANS, a transition will be required and mechanics
must be created to allow for the conversion from a research effort
to a viable privatized entity to carry out the mission."
Weis goes on to cite Wolff's letter of September 10, 1990 to Doug
van Houweling authorizing ANS "to solicit and attach to the
NSFnet Backbone new users, including commercial users . . ." He
continues by saying that the "body of this paper describes how
ANS expects to implement these concepts."
First and foremost Weis needs revenue to push the network to the
speeds that he has desired. He proceeds to list nine activities
from which he anticipates gaining revenue.
1. "ANS anticipates that many of its potential clients will be
qualified institutions who are currently attached through NSF
funded mid-level networks. Direct attachment to ANS will
provide them with many benefits not available to them currently.
Characteristics such as performance, services available, quality,
and others will be the determining factor in many cases." Weis
then goes on to point out that since such institutions are already
attached to the network, if he prys them away from a mid-level
and attaches them directly to his backbone, they will not count as
part of "the ANS incremental user population" for which ANS
would be responsible for investment in new backbone
infrastructure. Nevertheless, he assures the NSF in the next
sentences that ANS will invest in the network to broaden the
overall infrastructure.43
2. "Direct funding . . . will come from several sources. The initial
direct funding source is the originating members contributions to
establish ANS. The initial payment of $2 million has been
received by ANS and an additional $8 million has been
committed."44
3. "In addition to the direct funding mentioned, both IBM and
MCI will continue to invest significant indirect funds in the form
of equipment, people resources, and circuits above and beyond
the funding made available by NSF. . ."45 Hindsight appears to
show that these were activities that both companies were
involved in anyway. While IBM was developing the PARIS/Planet
Switch that Weis could use, it was not doing the work solely for
Weis. (If the work had been just for the benefit of ANS, we
should expect to see some indication of its value listed in the ANS
Form 990.) The same thing is true for MCI which was developing
T-3 business services, but obviously not solely for Weis' benefit.
4. "Another significant source of funding will be: the attachment
revenues derived from research and education users".46 It is not
clear what Weis means here. Perhaps he is talking about the
universities that he is going to take away from mid-level networks
and attach to his own?
5. "the attachment revenues derived from not for profit mid-
level networks;"47 All mid-level networks were attached by the
NSF to the backbone for free. If this were going to change and a
mid-level were to have to pay ANS $50,000 a year for a backbone
attachment at T-1 or $300,000 for a T-3 attachment, the mid-
levels would have to try to recoup these charges by increasing
what they charged their university or commercial customers. To
the extent that these prices grew higher, the gap between the cost
of connecting to a mid-level and connecting directly to the ANS
backbone would decline. This would make it easier for ANS to
achieve the purpose cited in point one above: detaching current
clients from the mid-levels and attaching them directly to ANS.
Weis viewed the matter somewhat differently in his words to the
author: the very success of the mid-levels that could sell
attachments without having to account for the cost of backbone
service could lead to the downfall of the network when the
backbone could no longer support the traffic they shoved on to
it.48
6. "revenues from attaching commercial providers of information
to the research and education communities;"49 In addition to
the direct attachment fee, it appears that Weis was thinking of
this as a means of increasing the attachment fee paid by the mid-
level in order to receive the commercial traffic.
7. "attachment revenues from for-profit mid-level networks;"
These revenues would fall into the same category as point 5
above. They would presumably be those networks who over the
next year in reacting to ANS pressures would form the
Commercial Internet Exchange (CIX).
8. "other billable service and consulting revenues;"
9. "grants from industry and government. All of these sources
will be required for ANS to meet its goals."50
Clearly in view of the breadth of ANS' revenue requirements its
goals must have been ambitious. But other than in the very
general introductory paragraphs described above and in Weis'
interest in extending the backbone to OC-12 speed within two
years, the goals were not described. Why the emphasis on speed
was there - regardless of demand - was left to the onlooker's
imagination along with any kind of detailed cost budget. ANS
wanted to impose a broad swath of charges to build a "faster"
network. Weis showed a blind faith that if technology were put
in place people would find uses for it.
But the ANS vision did not stop with the cost recoveries from
pricing just described. The Proposal went on to say:
"For ANS to make the investments that will lead the network to its
next plateau, SONET technology, funding above and beyond the
recoveries derived from its pricing will be required. It is
expected that such funding will come from investments by
government, industry and the research and education
communities."51
Weis appeared to be saying that the newly privatized entity
would remain dependent on outside "investments" no matter
what..
The very next paragraphs of the proposal shift focus back to the
present:
"Qualified mid-level networks are expected to attach to ANS so
that they can offer their users the advantage of a broader set of
usage guidelines and the ability to access commercial providers
on the national backbone. This concept was discussed at a recent
meeting organized by the not-for-profit mid-level network
operators and the proposal currently under consideration is
attached as Appendix C. [A Mechanism for Capital Infusion into
the Backbone Via Mid-level Network Fees and Settlements for
Commercial Traffic.]
The proposal contemplates attaching the qualified mid-levels at
ANS standard pricing as a minimum fee with a premium fee
assessment for commercial traffic transferred between ANS and
the mid-level. The accumulated premium fees will subsequently
be reallocated by ANS to the parties which carry commercial
traffic for the benefit of the national infrastructure. Portions of
the available premium fees will be used to enhance ANS services,
as well as a portion being redirected to the appropriate mid-
levels to build their local infrastructure in support of the national
network initiative."52
Clearly the "reallocation" of "premium fees" was the
infrastructure pool in nascent form. However when FARnet wrote
to Al Weis during the summer of 1990 and said: "NewNet should
be flexible in making business arrangements with the mid-level
networks and should endeavor to preserve not supplant them"; it
is unlikely that the imposition of a means of "capital infusion into
the backbone via mid-level network fees" was what FARnet had in
mind.53 The above two paragraphs summarize Appendix C of
the ANS "Proposal" of January 15, 1991. This plan would
continue to evolve until August of 1991 when ANS presented it at
a major FARnet meeting as the ANS Plan for Commercial Services.
Appendix C shows that ANS was proposing to measure traffic sent
to and received from the mid-levels in the form of "COMbit
counts which would be a "'Combination' of network elements
characterizing traffic load . . . used to calculate specific
percentages" in the categories of research and education,
commercial, and commercial to research and education. ANS
gave an example of a fee calculation for a midlevel 85% of whose
traffic was research and education only, with 10% commercial to
research and education and 5% commercial only. The network's
base fee for attachment to ANS would be $5000. However there
would be three fees added on top of this. First a research and
education traffic fee of $10,000, a research and education to
commercial traffic fee of $12,000 and a commercial traffic fee of
$20,000. Such a network would pay the following additional
fees: 85% of 10,000 or $8,500; 10% of 12,000 or $1,200, and 5%
of 20,000 or $1,000. The total fee for the mid-level would be
$15,700.54
The Appendix goes on to list a Basic Fee of $15,000 and the
difference of $700 between basic fee and the full $15,700 as the
Premium Commercial Fee. (Note that it was presumably out of
this very small percentage difference that the money for
infrastructure enhancement would come after other deductions
were taken.) It does not describe how the basic fee was arrived at
and it also does not say what the fee would be when applied to a
large versus a small mid-level. Nor does it say how the fee for a
specific mid-level would be arrived at. In section H of the
Appendix it does say that "funds redistributed to specific mid-
levels would be based on individual negotiations between ANS
and each mid-level."55 Presumably the fee for each mid-level
would be arrived at in the same manner.
After saying in the body of its Proposal what it would require of
the of the mid-levels, ANS went on to say what it would give back
to the network:
"In working toward meeting the spirit an letter of its agreements,
ANS will fund:
1. Physical attachment to the shared infrastructure . . .
2. Services associated with an incremental ANS attachment
to the shared infrastructure . . .
3. ANS traffic load placed on the shared backbone . . .
4. At NSF's request, ANS will participate at no cost to NSF,
within the limitations of ANS' available resources, in technology
demonstrations and conferences that serve the national interest.
5. ANS is committed to develop new tools and applications .
. ."56
Perhaps because ANS sold very few attachments to its network,
one looks largely in vain on its first Form 990 for evidence of
expenditures on the network that it, as opposed to the US
Government paid for.57
Footnotes
42 The document, received from the NSF under the Freedom of
Information Act, will be cited as Weis , "A Proposal". It is 12
pages long (five pages of text and 7 pages of Appendices. ANS
was now four months old and Weis was no longer an IBM
employee, yet Weis' network address was still WEIS@IBM.COM.
43 Weis, "A Proposal," p. 2. Weis' original document does not use
numbers. The author has inserted them for clarity.
44 Ibid., p. 3.
45 Ibid.
46 Ibid.
47 Ibid.
48 Conversation between Weis and the author at the Educom
Reception January 9, 1991.
49 Weis, "A Proposal," p. 3.
50 Points 7-9: Ibid.
51 Ibid., pp. 3-4.
52 Ibid., p. 5.
53 For FARnet statement see footnote 6 above.
54 Weis, "A Proposal," pp. 10-11.
55 Ibid., pp. 11-12.
56 Ibid., p. 3.
57 If one counts the full $2,660,000 listed as accounts payable to
IBM as money expended on the network's RS/6000 routers and
adds it to the $7,279, 504 listed as spent on the network, one gets
roughly $9,940,000 -- an amount spent of less than $600,000
more than it received from the US government.
---------
Although NSF Director Steve Wolff had roughly 2,000 words of comments on the
author's draft, he had none on this section.
_________
If readers choose to redistribute this I ask them to do so infull and
unedited.
_______________________________________________________________
Gordon Cook, Editor Publisher: COOK Report on Internet -> NREN
431 Greenway Ave, Ewing, NJ 08618
cook@path.net (609) 882-2572
_______________________________________________________________
