Transaction Based Settlements Encourage Waste (was Re: BBN/GTEI)

Mike Leber mleber at
Sat Aug 22 16:31:54 UTC 1998

On Sat, 22 Aug 1998, Michael Dillon wrote:
> On Sat, 22 Aug 1998, Mike Leber wrote:
> > If your split isn't 50/50 (in other words settlement free) I guarantee
> > anybody with half a brain will balance out their traffic by hosting the
> > correct type of applications so that you owe them money.
> Of course if everybody does this, then the traffic will balance out. Seems
> to be a good thing to create the incentive, no?

The point is that anybody interested in making money would make sure that
traffic didn't just balance out, they would develop a business plan where
they maximized revenue from settlements where possible.

> > it should be obvious to the casual observer that anybody reasonably
> > informed would never suggest them. 
> Then I must be unreasonably informed because I think that some form of
> exchanging money to even out imbalances would give providers more choice.

Ok, so that was gratuitous. Let me put it this way, transaction based
settlements encourage creative minded people to go out and create
businesses based on this new revenue source you have created.  Ultimately,
traffic would be generated for traffic's sake, and this would be waste.

Evening out imbalances isn't what would happen.  Businesses don't exist to
even out their profit and loss statement.

Understand, for the sake of argument I'm not saying that anybody would
necessarily generate traffic destined for the bit bucket, I am saying you
incentivize bad behavior with transaction based settlements.  See examples

> They aren't legitimate if the sole purpose of the method is to create
> traffic; that would be fraud. A webcrawler would be fine if it was for a
> search engine but not if you just ran it and discarded the data.

Ok, so how about if you have a big dialup pool, or a R&D department is
developing a new type of web index, or somebody is studying word frequency
occurance of written english in web pages, or any one of half a dozen
other perfectly legitimate uses that suck traffic instead of pulling
traffic (and these two are just what I thought of in the second when I got
to the period in your sentence, I could come up with hundreds much better
uses based on what people are already doing as legitimate businesses

Ok, now think about what happens if a provider earns revenue from any of
these applicatons.  Instead of charging for the bandwidth a provider could
actually pay the users that generate this type of traffic.

Ok, now see how easy it would be to attract legitimate users.  People
would run ads to the effect of "Are you a dialup provider?  We'll pay you
to get an OC3 from us!"   Or "Are you a web crawler?  We'll pay you to
host with us?"  Or any one of several other examples...

Michael, I've met and talked with you several times and have the general
impression you're a relatively creative guy.  I find it hard to believe
that you are myopic to the extent of not being able to imagine these and
other uses... unless the actual goal of your proposal is to have dialup
providers and web crawlers get paid for existing.

At first glance that might be your impression as to what happens. 
However, can't you see how this type of settlement encourages web crawlers
to generate more traffic. 

Again, as just one of hundreds of ideas, imagine that a web crawler house
has the choice of updating their database once every 30 days or once every
15 days.  Now imagine they make the decision about this in light of the
fact they get paid for additional traffic.  So now they have an incentive
to update their database more frequently.  Wow, what a great service for
the customer!  And as a kicker, they make more money from settlements!

And web crawlers are just one application, and not the only one that sucks
traffic from web servers.  And I can think of many more perfectly valid
uses for other protocols.  Again, if you use your imagination, you can
create a legitimate business based on currently existing online businesses
and get the desired traffic flows. 

Ultimately, in all of these cases less efficient algorithms and uses will
be chosen in the direction that results in positive revenue, and waste
will occur.


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