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Gratis teller

Open or closed - that is the question

Once upon a time electricity, than seen as another means of lighting your house, was new. It had to compete with gas networks. The owners of the last protested - electricity was 8 times as expensive, hence unnecessary, foolish and maybe dangerously competetive. Said those gas peddlers.
The resemblance to today's bandwidth provisioning is striking. Once again there is a battle between old and new networks. Maybe we should heed the lessons from the past: older networks deliver less, commodification delivers the most bang for your hard earned buck.
On this page some information on open, commodified bandwidth networks.

Very thorough Australian study: fiber generates 800% revenue - when open 20% more
The privatized Australian national reseacht institute studied the economic and sociatal benefits of a fibernetwork in Brisbane and Queensland. Their conclusion: "The gains (through deploying fiber) far exceed the initial investment costs required to finance the network."

They write:
"This study evaluates in detail the economic impact of a true broadband network throughout a major urban centre in Australia. Specifically the study examines the impact on the host region, which in this case is the Brisbane and Moreton statistical divisions, as well as for the State of Queensland at large. It also examines the impact for industries within the State.
A true broadband network is a broadband infrastructure capable of supporting at a minimum video, voice and data services and applications simultaneously over a single physical infrastructure. True broadband delivers symmetric services at speeds greater than 10 Mbps.

The analysis factors in a network cost of approximately $850 million over a four-year construction period. This includes backbone infrastructure costs as well as the hardware, software and installation costs of delivering fibre-to-the-home connectivity.
The findings suggest that the Queensland economy would benefit in the following ways:
• increase real output or gross state product (GSP) by $854 million per annum at the end of 15 years (i.e., by 2018-19). The increases in output have a value today (i.e., NPV) of $4,180 million;
• additional employment equivalent to 1,155 new jobs in the year 2018-19; and
• increase annual aggregate consumption by around $499 million in 2018-19.
This has a value today of $2,835 million.

The study also analysed what the economic impacts would be if the infrastructure was operated as an open access true broadband network. This approach leaves the network operation in the hands of a neutral carrier, while it was open for a number of retailers to offered a range of different services that would be carried over the network. This would introduce more choice and innovation in the bundles of services offered or carried over the network with even more competitive prices. Under this scenario it was expected that better services and lower prices would stimulate faster subscriber takeup and use of the network.

The simulation results suggest that there are additional economic benefits for the region and the state from additional competition in the provision of true broadband services. These include:
• an earlier realisation of increases in regional output. Additional competition raises the NPV of the increases in GRP to $3,160 over the period (relative to $2,640 million if the network is owned and operated by a vertically integrated retail service provider);
• additional increases in GSP. This raises the NPV of increases in GSP to $4,900 million (compared to $4,180 million assuming a vertically integrated retail service provider); and
• increased consumption. The NPV of the increases in aggregate consumption assuming additional competition is $3,414 million relative to $2,835 million if the network is owned and operated by a vertically integrated retail service provider.

For the communications industry there is an additional gain from increased competition. This incremental gain is equivalent to 0.07 per cent of output by the year 2018-19. Other industry segments would experience a slightly lower growth in output relative to the vertically integrated scenario. Relative to the base case, however, all industries benefit from the construction of an open access true broadband network in the region.

The findings of the study suggest that the majority of the above benefits accrue from the increased productivity gains experienced by industry generally and to a lessor extent, expansion of the telecommunications sector (i.e., the businesses providing the true broadband network), with expansion of digital content industries making a relatively modest contribution.
The overall message of the analysis is that there are substantial net economic gains available to the region in the analysis, and probably many other major urban areas in Australia from the development and use of a true broadband network. These gains far exceed the initial investment costs required to finance the network."

ERN01_Final_Report_2_Broadbandproductivity_1.pdf

Looking Back on Commodities tells about the internet future
Gas, water, electricity we do not classify by brand, but per unit. So much money per liter/gallon, per kilowatt/hour or per cubic meter. Soon we will do the same with data: Euro/dollar per megabit connection and per gigabyte traffic.

Jonathan Schwartz (COO, SUN) writes:
In looking at the evolution of the commodity called computing, history provides an extraordinary parallel to the evolution of electricity. In fact, if you haven't read it, I'd highly recommend "Empires of Light," by Jill Jonnes. It's a very entertaining historical examination of how electricity was first discovered (rubbing amber produced mysterious sparks), reliably generated, and ultimately distributed across the world.

One of my favorite anecdotes from the book describes the financier JP Morgan's decision, as the primary backer of Thomas Edison's Menlo Park electrical inventions, to wire his house for electricity. He elected to dispense with the "vile poison" of gas lighting, and place lightbulbs throughout his Madison Avenue mansion.

Not only did he have a customized generator placed in his stable, but given the fragility of the system, he had a professional electrical engineer staffed to manage it. So at 11pm every night, the lights went out, because the engineer went home. It makes the point - early in its evolution, only the wealthy could afford electricity (along with the requisite generator and electrician), and the technologies were fragile. Businesses that wanted power generation facilities were similarly wealthy enough to afford large-scale versions of the same, staffed with a "chief electricity officer" and teams of electricians. They didn't exactly experience 5 9's availability (and people actually died regularly, talk about MTBF).

It took about a decade for those deploying electricity to settle on a few standards that ultimately accelerated consolidation. From voltage to cycle to plug configuration. (The processes used to get there, although they involved far more violence and loss of animal life, bear a remarkable resemblance to standard setting in the computing industry.) Spooling forward, once the standards existed, businesses could plug into a grid - labor markets went through a fairly sizable dislocation (all those engineers and "CEO's" had to find other work), but electricity was firmly established as a ubiquitous service. Scale efficiencies and the resulting massive decrease in price allowed the government to bridge the power divide through rural electrification. Electricity that started out 20 times the price of gas lighting - obviously got a lot cheaper.

What's most interesting to me is that once the standards were set, and the grid powered up, electricity finally established a transparent price - the hallmark of a true commodity. If pricing isn't transparent, products can't be deemed a commodity - by transparent, I mean equivalently defined for a standard unit of measurement. Here are a few examples, "5 cents per kilowatt hour," "2 dollars per gallon." It's either a standardized physical delivery (gallon, barrel, ton), or unit of consumption (typically time based, 100 megabit hours, megawatt hours, etc.) - but it's the same across the industry.

http://blogs.sun.com/roller/page/jonathan/20050130#looking_back_on_commodities

Open networks: the path to the future
Malcolm J Matson writes:
The massive over investment in telecoms infrastructure made during the 1990’s which eventually ended in market collapse, was all focused on adding to trunk and international fibre capacity. There was zero investment in the ‘local loop’ – the ‘first mile’ as it is increasingly being termed, which comprises the dedicated pair of copper wires (based on 19 th century technology) which provide the exclusive link between every telephone in the world and a local telephone exchange or ‘central office’. Not just phones but the expanding number of personal computers and other intelligent devices currently have to connect to each other and the rest of the world via this weak link of the local loop and local telephone exchange.
(...)
Although in 1984 when the UK first contemplated the need to install a new local broadband infrastructure, the term “broadband” meant a capacity of at least 2 Mb/s, the term has been cleverly re-defined over the intervening years by the telecoms industry, such that it is now being applied to their ‘next step’ in their gradualist approach to deploying new technology in order to squeeze more life (and revenue) out of their obsolete copper local network which was written off
decades ago.
(...)
The reason why ADSL (or asymmetric cable internet) offends against any legitimate definition of the term broadband is that an asymmetrical infrastructure, as ADSL is (512 kbit/s downstream and 256 kbit/s upstream) reinforces an old network-centric telephony assumption that “value and content” are to be found at the “centre” of the network and are to be “DOWNloaded”. The reality is quite the contrary. As already discussed, ALL “value and content” originates and resides at the periphery of the network – to be shared/sold/purchased to and by all users/consumers – also at the periphery.
(..)
The OPLAN topography Independently owned and controlled local passive
infrastructure which is ‘open’ for any person with a physical presence in the community to access by payment of a periodic charge. This includes the incumbent PTO, all its competitors – either long distance network operators or service providers – who will be able to access the OPLAN either by establishing a direct physical connection to the infrastructure or, more likely, over some other long distance carrier that has decided to do so and provide carriage for third-party
service providers.
Any point on the OPLAN can communicate with any other point on that OPLAN at no marginal cost, once the periodic access charge has been paid, (i.e. bandwidth is ‘free’ within the OPLAN). It is expected that this access charge will compare very favourably with the current periodic charge levied by BT for a copper PSTN connection to the local exchange.

open-network-4th-utility.pdf

Pon vs Ethernet
An interesting White Paper has been published by Riverstone on the issue of PON versus Active Ethernet architectures in FTTH deployments. Excerpt:
Triple play rollouts are one of the bright spots in the global telecom
industry today. Carriers and municipalities that announce plans to
rollout triple play (voice, video and data) services are faced with a
number of choices for an access mechanism – DSL, Fiber or even
wireless. This paper focuses on fiber as the access mechanism and
compares the Active Ethernet and PON architectures. The paper
shows how Active Ethernet is not only more cost-effective than
PON but also results in a more profitable services platform that
accommodates the inevitable changes in services over time.

http://www.citynet.nl/upload/pon_vs_active_ethernet.pdf

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