Customer AS

Sean Donelan SEAN at SDG.DRA.COM
Mon Aug 26 08:18:04 UTC 1996

>Frankly, where there is significant competition and little
>or no loss-leading and cross-subsidy, the Internet 
>is precisely as reliable as people are willing to pay for.

This is likely true.  It is also likely rational producers won't
use resources for something when they could make more money
with the resources elsewhere.  If you look a little more closely
I suspect circuit-switched and packet-switched networks end up with
nearly the same value for the lines.

A bigger problem might be trying to convince a high-muckty-muck manager
with many years of voice telephone circuit experience that there is more
than one way to calculate the value of a line.  Depending how you account
for interconnect costs, a provider selling $2700/month T1 packet-switched
connections with a 23:1 bandwidth overbooking ratio generates the same
revenue as analog voice circuits at 10cents/minute - 4cents/minute
interconnect fees.  As most Internet providers say, not including
local loop.  If you want a lower bandwidth overbooking ratio, you
pay more.  If you don't mind a higher bandwith overbooking, you might
pay less.

This explains the goodput, or throughput of a network, not necessarily
the reliability of a network. If gross revenue was the only determinate
of network reliablity, at $2700/month/T1 and 23:1 overbooking I should
get 67Kbps end to end with the 99.93% reliabilty of the voice network.
Well, there was a few rounding errors long the way, but 67Kbps is darn
close to a DS0 at 6cents/minute.  Bad news for the Internet telephony
folks, there still ain't no such thing as a free lunch.

If I'm paying for voice telephone level quality, am I getting it?

Yes, I have just proven why firetrucks are red :-).  With enough
numbers, you can prove almost anything.

A different question is how to account for risk.  A DS3 voice line failure
may cost the carrier $4,032/hour (10cents/minute) in lost revenue opportunity.
But the customer has no monetary risk with post-paid calls.  If a voice call
isn't completed the customer pays nothing.  On the other hand a DS3 data
line failure may cost the carrier nothing in lost revenue opportunity if
the customers pay a fixed access fee.

A gross generalization is fixed access fees tend to encourage providers to
run their networks as close to the edge as possible to maximize profits.
This isn't a problem *if* consumers understand the risks involved.  I think
the risk transfer from provider to network customer accounts for more of
the Internet reliability problems than just gross revenue (or the lack
of revenue).  TCP/IP and the Internet puts the onenous on the end-networks
or end-systems to maintain a reliable connection over an unreliable
network.  That was the plan, wasn't it?

Oops, what's missing.  If you have an unreliable network in the middle,
the end networks need a few (2,3,4?) different connections to other
networks.  The Internet isn't supposed to work like the voice telephone
system, and connections to the Internet shouldn't be purchased like
connections to the telephone system.  The Internet is a risky system,
and should be purchased like a risky system.  When pension plan
administrators choose portfolio managers to handle the pension investments,
the administrators generally split the pension plan assets among three
managers with different investment styles.  Its called risk diversification.

Internet Network Operators (to relate this slightly to NANOG) need to
look at diversifying their Internet connections between providers.  The
key to making the Internet work for you is learning how to manage risk.
Your stock broker wouldn't advise putting all your retirement money in a
single telecommunications company stock, why would your Internet
"consultant" advise buying all your Internet connections from one
Sean Donelan, Data Research Associates, Inc, St. Louis, MO
  Affiliation given for identification not representation

More information about the NANOG mailing list