best effort has economic problems

Sun May 30 18:40:00 UTC 2004

Thus spake "Gordon Cook" <cook at cookreport.com>
> The point I am making in my report is NOT that the best effort
> network has technology problems but rather that it has ECONOMIC
> PROBLEMS.  That it might support 2 or 3 players not 2 or 3 HUNDRED.
> That until companies begin to go chapter seven and vanish, the best
> effort net will be a black hole that burns up capital because, for
> many players, the OPERATIONAL expense is more than they get for
> bandwidth never mind cap-ex.
>
> best effort won't go away.  many best effort players will.
>
> for the time being, best effort bandwidth prices as an absolute
> commodity cannot sustain networks over the long haul.  A network that
> can deliver QoS the report hypothesizes may be able to attract enough
> revenue to become profitable.  How to to this my group is still
> discussing.  We don't pretend that QoS is easy or any kind of mature
> collection of technologies, but increasingly it looks as though the
> industry, if it is ever going to be self sustaining, really needs to
> look at QoS services and solutions.

This problem has little to do with BE vs. QoS.  It's a temporary market
imbalance caused by providers willing to sell service for less than cost; in
the absence of external factors, eventually enough providers will go under
for prices to rise back above cost.

Possible external factors mainly consist of providers finding other add-on
services sufficiently profitable to offset losses from basic transport.  QoS
is one possible add-on, but I haven't seen any convincing evidence customers
would buy it today if it were available.  There are many other services that
providers could offer on top of the basic transport that could have the same
effect without the substantial technical and economic challenges that QoS
presents.

This adds up to a market where it's possible for IP transport (BE or
otherwise) to be unprofitable yet exist indefinitely.

S

Stephen Sprunk        "Stupid people surround themselves with smart
CCIE #3723           people.  Smart people surround themselves with
K5SSS         smart people who disagree with them."  --Aaron Sorkin