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Internet as a critical infrastructure: lessons from the backbone experience in South America. F. Beltran, A. Bourdeau de Fontenay, & M. Wohlers Presentation: IDATE, Montpellier 22 November 2005 A. Bourdeau de Fontenay & J. Liebenau. Agenda.

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internet as a critical infrastructure lessons from the backbone experience in south america

Internet as a critical infrastructure: lessons from the backbone experience in South America

F. Beltran, A. Bourdeau de Fontenay, & M. Wohlers

Presentation:

IDATE, Montpellier

22 November 2005

A. Bourdeau de Fontenay & J. Liebenau

agenda
Agenda

Given Internet’s strategic role in economic activities around the world,

  • Is Internet a critical infrastructure & what is it that is “critical” in Internet?
  • What can we learn from and for the South American experience?
south america s internet infrastructures
South America’s Internet Infrastructures
  • Analysis restricted to:
    • Argentine, Brazil, Chile, Colombia, Peru, & Venezuela;
    • Below IP: backbones & interconnection/NAPs;
  • How can we understand different governance structures?
    • Is Internet perceived/treated as an infrastructure?
    • How to compare various governance?
  • Only a preliminary research step:
    • Internet not studied from that perspective; and
    • Limited empirical information.
problem
Problem
  • Is the backbone sector “competitive”?
    • Contestability (role of vertical integration);
    • Efficiency.
  • South America policy perspective
    • Historical & growth;
    • Universal access; vs. targeted access;
    • Suggest some “infrastructure perspective.”
  • Internet as an infrastructure
    • Markets & market structure;
    • Governance & exchange commons;
    • Internet geography.
telecommunications in latin america
Telecommunicationsin Latin America
  • Significant overall progress
    • Fixed telephones almost doubled
      • 53 million to close to 93 million;
    • Mobile grew 8.5 times
      • 20 million to 172 million;
    • Internet users increased twelve-fold
      • 6 million to 72 million.
  • Growing digital divide
    • 14% penetration in Latin America vs. 50% access in developed countries;
    • Substantial population without access.
  • Policy concern
    • Universal vs. localized-targeted.
emergence of south america internet
Emergence of South America Internet
  • Access characteristics
    • Use of IBPs (international broadband providers);
    • All traffic routed via US.
  • Mid-90s: commercial access
    • New entrants;
    • Existing data networks;
    • Some incumbents.
1998 nap cabase argentina
1998: NAP Cabase Argentina
  • Cabase: Argentine Chamber for Databases and On-line Services;
  • ISPs
    • Initially: 3 ISPs
    • Now: 12, a mix of ISPs, data networks, & telco.
  • Not-for-profit
    • NAP outsourced to Comsat Argentina
    • Advocacy
  • NAP
    • 100% of national interconnection - all must be peering
  • Exclude international links (bilateral agreements)
cabase argentina governance
Cabase Argentina governance

Open-Policy “equalitarian” NAP governance

  • Uniform membership requirements
    • Largely consensus;
    • Egalitarian
  • NAP contracts are uniform
    • Exclusively peering;
    • Members’ routing tables available to all
governance sustainability
Governance sustainability
  • 2003: Defection by 4 members
    • Commercially motivated (expected due to VOIP)
    • Traffic scale-based justification but
    • Disruptive to others (e.g., routing tables)
    • Request for compensation
    • Originally partial & eventually total.
  • Governance problem
    • No provision for defection foreclosure
    • No provision for dealing with conflicts among members
  • Appeal to government
    • Available but not pursued
nap chile
NAP Chile
  • Initiated by 6 ISPs
  • Led to Internet Provider Association
  • Regulation
    • Non-discriminatory, e.g.,
      • Access to content
      • Access to backbones
    • Peering obligation (national traffic)
    • Quality requirements
1998 nap colombia
1998: NAP Colombia
  • 12 ISPs create the Colombian Chamber of Informatics and Telecommunications (CCIT)
  • Egalitarian governance
    • Exclusively peering
    • Member-shared routing tables
    • 90% national traffic
    • Overall cost saving estimated at $1 Million
    • Operating costs migrated from equally shared to traffic-based
lessons from south america
Lessons from South America
  • Geographically-based NAPs;
  • Significance of NAP creation
    • Commercial/tier-based vs. equalitarian
    • Ability to evolve through time & potential for disruption
    • Significant cost considerations
  • Possible lessons
    • Critical infrastructure
    • Justifications for government intervention
      • Short run vs. long run
      • Peering vs. transit
      • Discrimination
background
Background
  • Is Internet a critical infrastructure?
  • What constitutes Internet’s infrastructure?
    • Layer & function-based
    • Utilization routines
  • Interaction between infrastructure and market structure
  • Governance efficiency & sustainability
what s an infrastructure
What’s an infrastructure?
  • Intuitive and, yet, complex:
    • “The basic underlying framework or features of a system or organization.”
  • Conventional views:
    • Capital-intensive high sunk cost activities (e.g., streets); &
    • Society-wide activities (e.g., health).
  • Ignored by modern economic analysis
    • Today’s analysis based on goods & services & market-type environment
    • Limited integration of “exchange commons” dimensions:
      • Externalities
      • Governance
critical infrastructures
Critical infrastructures
  • What is happening to infrastructures? Is infrastructure still a relevant concept?
    • Established
    • New?
  • How are infrastructures evolving through time?
  • Are infrastructures context-specific? Today’s FCC Internet regulatory policies
    • Yes: 9-11/terrorism
    • No: Deregulation of incumbents
    • Yes? Broadband as primary strategic goal
adam smith infrastructure economics
Adam Smith & infrastructure economics
  • Government’s 3 duties
    • Defence
    • Justice
    • Infrastructures
  • The extent of the market & competition conditional upon the government’s duties
  • Minimization of government’s role conditional upon the government providing infrastructures
infrastructure economics government market roles
Infrastructure economics:government & market roles
  • Infrastructures generally evolve from markets
  • A review of Coase’s lighthouse analysis:
    • Private sector
      • Can provide infrastructures;
      • Inadequate treatment of rivalry & excludability
      • Externalities
    • Regulation &/or licensing
  • “Exchange commons” governance is what matters
infrastructures and round about production
Infrastructures and “round about” production
  • Young (1928): division of labor evolved to “round about”/layered production/transaction activities
    • Growing complexity of outputs
    • Increasing layering of processes
    • Innovation-based discontinuities
  • Implications for infrastructures
    • What layers are infrastructures?
    • Are “systems” (e.g., Internet as a system) infrastructures?

Modern infrastructures support

a very wide range of activities across the economy

infrastructures and exchange commons
Infrastructures and “exchange commons”
  • Exchange commons
    • Conceptualization of transactions taking place in a generalized exchange regime within which markets of various kinds are subsets
  • Infrastructures are operated within exchange commons
    • Market inadequacy
    • Role of governance
internet s geography
Internet’s geography
  • Internet transforms rather than eliminates the geographical dimension of economic activities
    • Good for some regions & bad for others
    • Human exchanges can only be partially “codified”
      • Codification leads to geographical independence
      • Hard-to-codify knowledge implies geographical limitations (e.g., exchange of personal views, complex transfer of information)