[9159] in Commercialization & Privatization of the Internet
Re: an Internet buying coop?
daemon@ATHENA.MIT.EDU (Karl Denninger)
Sun Dec 19 19:35:18 1993
From: karl@mcs.com (Karl Denninger)
To: stpeters@dawn.crd.ge.com
Date: Sun, 19 Dec 1993 18:32:52 -0600 (CST)
Cc: karl@mcs.com, tenney@netcom.com, com-priv@psi.com, communet@nysernet.org,
In-Reply-To: <9312192137.AA03776@spare-parts.crd.Ge.Com> from "Dick St.Peters" at Dec 19, 93 04:37:17 pm
> > If there is a coop out there that thinks they can make a go of it, pull the
> > line and do your own resale deal with whoever. This is a ~$30k + $10k (CIX
> > membership) annual proposition. If you can make it pay with $50,000 a year
> > in direct costs then more power to you. That is exactly what anyone else
> > can do.
>
> There would be lots of coops that could make a go of it if they didn't
> have to shell out $50K/yr but instead paid slightly higher costs for
> service as their share of their provider's membership. The free market
> is a damn good system for apportioning costs among users.
Price an ANS circuit sometime. A T1 is nearly $50k/year once you get
all said and done, ASSUMING you don't use more than some amount of the
bandwidth. It's closer to $70k/year for unlimited use.
Alternet's new "resale service" has a <$15,000> connection charge. You
wanted to talk about fees which coops couldn't afford? There's one that
gets you absolutely <nothing>; its a "cover charge" in effect, disregarding
the fact that they say this is to cover the complexities of peering BGP
with you and getting the routing right (for $15k I would want a warm breathing
technician at my site for a <month solid>, all expenses paid, and an ironclad
guarantee that if routing fails Alternet owes me money damages by the minute
for as long as its hosed.) Nonetheless, Alternet is free to sell this kind
of deal to companies for whatever they can get -- as is anyone else. <I>
happen to think its a bad deal, but that's my call.
Economic realities <ARE>, whether you like them or not. Wishing that the
local telcos didn't charge upwards of $1k/month for <local> T1 circuits is
fine and dandy, but it doesn't change what the real life numbers look like
when they're in a spreadsheet or whether your nascent business is going
to be profitable or go under.
Those numbers either make or break businesses, and screaming that "those are
unreasonable numbers" doesn't change the facts.
These numbers are also why those who rail about "NII must be accessible
to everyone at zero cost" are barking up a tree that has no leaves on it.
The net is NOT free, and never was. Those ivory-tower academicians are
welcome to go out and start their own network, run their own numbers from
the telcos and others, buy their own gear (have you priced a CISCO AGS+ or
C7000 lately?) and then figure out how much they have to pull in just to
break even.
Good luck.
MCSNet hopes to make a profit at this. Not a killing -- a profit. So do
the other people in this business -- Netcom, Panix, etc. We're all in this
game pricing as we think we must to stay in business, return something to
the shareholders, and pay the salaries, rent, line charges and CIX
memberships. Is it tough sometimes? Yep. If you want "easy" go take a
desk job at IBM and be the next one laid off.
> > Doing this means that your cost of doing so as a coop is <reasonable>. If
> > the CIX becomes a small members-only club then the cost is going to rise
> > astronomically and shut out the coops and other "nontraditional" members from
> > participating at all. It also sets the stage for a really ugly monopoly
> > position to develop where a very small number of providers end up basically
> > pricing CIX membership out of reach for all except a few. This is NOT a
> > good thing.
>
> The CIX is *now* a members-only club with a membership fee that is *not*
> reasonable for a small coop. CIX membership is already priced out of
> reach of all but a few.
Really? Its cheaper than what I am paying for <ONE> local T1 to one of my
remote POPs. Priced out of the reach of all but a few? Only by their
choice. I find the policies rather reasonable and the price of entry
to the club is within the value I think I'm going to receive. Thus, it is
a good business decision.
Check out office space sometime. A reasonable (small) office is well over
$1k/month. That's more than $10k/year. So are a lot of other things. I
get a $1,000 a month phone bill for all the local circuits. Guess what?
That's more than the CIX membership too. A smallish floor (~10,000 feet)
in a Chicago office building will cost you over $16,000 a <month>, and that
is with a seriously soft office market! These are real numbers - the kind
of bills business pays today.
In fact, the membership fee is well under <half the circuit cost, excluding
the local telco charge>, of the <cheapest> IP provider for a T1 circuit
in this country today, and under <one third> of the total annual cost of
a T1 circuit from that same company. This is considered excessive? On
what basis?
> I'm opposed to this philosophically; I like free market pricing, not
> pricing and policy dictated by trade associations - or anyone else.
Really? Who's dictating anything here? If you don't like the policies
is there something forcing you not to connect with Alternet, PSI, Nearnet,
Netcom, etc on their (and your) own terms? Nope. Not a thing prevents
this, except the size of your checkbook.
Economic realities in business don't bow to the whims of those who want to
build coops, or any other form of organization. TANSTAAFL. Either you
pony up to the bar with the admittance fee, in whatever form it exists, or
you don't.
The CIX is the best thing that has happened to date for commercial
connectivity. Does it cost real money to join? Yep. Is it unreasonable?
Not in my opinion -- its on a par with a bunch of other costs involved in
running a real business, and is not out of reach for most companies. Sure,
it is expensive, but MUCH cheaper than negotiating and connecting to a
couple of dozen other regional networks to get real connectivity.
And that, I believe, is the point of buying a membership, and the reason
MCS' check is going to be there shortly.
--
Karl Denninger (karl@MCS.COM) | MCSNet - First Interactive Internet and
Modem: [+1 312 248-0900] | Clarinet feed in Chicago. Send email to
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