OECD Gets It: The Internet Works, So Don't Break It

Yesterday I wrote about an extraordinarily clueless document from an arm of the UN that seemed to have no real understanding of what the Internet was, how people used it, or what should be done to build on its strengths. The awfulness of that...


Yesterday I wrote about an extraordinarily clueless document from an arm of the UN that seemed to have no real understanding of what the Internet was, how people used it, or what should be done to build on its strengths. The awfulness of that report contrasts painfully with a recent paper from another international agency, the OECD.

Its report "Internet Traffic Exchange, Market Developments and Policy Challenges" is generally excellent, and despite its rather dry subject matter, I urge you to read it for the insight it gives us into just how the Internet works, and why it works so well. Here's the core argument:

The performance of the Internet market model contrasts sharply with that of traditional regulated forms of voice traffic exchange. If the price of Internet transit were stated in the form of an equivalent voice minute rate, it would be about USD 0.0000008 per minute – five orders of magnitude lower than typical voice rates. This is a remarkable and under-recognised endorsement of the multi-stakeholder, market driven nature of the Internet.

A survey of 142 000 peering agreements conducted for this report shows that the terms and conditions of the Internet interconnection model are so generally agreed upon that 99.5% of interconnection agreements are concluded without a written contract. That these "rules of the game" are so ubiquitous and serviceable indicates a degree of public unanimity that an external regulator would be hard-pressed to create. The parties to these agreements include not only Internet backbone, access, and content distribution networks, but also universities, NGOs, branches of government, individuals, businesses and enterprises of all sorts – a universality of the constituents of the Internet that extends far beyond the reach of any regulatory body‘s influence.

That is, the Internet works brilliantly, and does so through a rough consensus that has no right to work as well as it does, and is yet another beautiful demonstration of how people can work together for mutual benefit – basically, creating a commons managed by a community, using norms that have evolved within that community. It's a pity that the report doesn't use the word "commons" to describe this, since it also goes a long way to explaining why the Internet is such a wonderful success.

However, a threat is looming over this verdant metaphorical commons – the threat of enclosure by those greedy telecoms companies, as the OECD report notes:

As incumbent networks adopt IP technology, there is a risk of conflict between legacy pricing and regulatory models and the more efficient Internet model of traffic exchange. By drawing a "bright line" between the two models, regulatory authorities can ensure that the inefficiencies of traditional voice markets will not take hold on the Internet.

Note how this explicitly calls out the "inefficiencies of the traditional voice markets" - inefficiencies which some wish to bring to the Internet for their own benefit, and to the disbenefit of Internet users.

The report also usefully explores why there is something of a crisis in terms of bandwidth provision:

The long-term, exponential growth of the Internet, the increasing performance and decreasing prices, have always been dependent upon exponential gains in technological development. From the standpoint of physics, from the standpoint of research and development, and from the standpoint of producing equipment and bringing it to market, there is no apparent end to the regular advances that can be made, if the work is performed. Since the telecommunication investment collapse in 2001, that work has not, by and large, been funded or performed. This has led to the transition from exponential growth, which held from the origin of the Internet in 1969 until the last of the optoelectronic technologies researched prior to 2001, made their way to market in 2003 and 2004, to linear growth, which has obtained since then. The earlier exponential growth allowed Internet bandwidth production to keep pace with increasing demand, with lower costs over time allowing corresponding reductions in consumer prices; the current linear growth is not keeping pace with increased demand and is not producing greater economies at larger scales; thus, wholesale and retail prices have not, by and large, fallen significantly beyond the introduction of those final Nx10 gbps technologies in any market.

What's interesting here is that it identifies lack of investment in fundamental research, not in network infrastructure, as the key issue. In a way, that's good news, because it's something that governments around the globe can address directly by funding more research in universities; this will then feed through to the commercial world in due course, bringing with it major advances and savings for all users.

As you might expect from the OECD, much of the report is filled with pages of figures, but there are also some excellent explanations of how the Internet works today in terms of its top-level wiring. I found this really useful, since I knew roughly how things worked, but not in the kind of detail this paper offers.

It's really great to see this level of knowledge circulating at the OECD. Moreover, its report is extremely timely: it addresses many of the key issues that will be discussed at the imminent WCIT meeting where telecoms companies are making their power grab for control of the Internet. Let's hope enough people there read the OECD report's unequivocal warning:

All of these reasons suggest that governments should approach any call for increased regulation of the Internet market with great caution, and with an appreciation for the risks involved. This does not mean that governments should accept uncompetitive outcomes, and in general this has not been necessary, since market performance has so far been very good.

Or to put it more bluntly: "hands off the Internet, it ain't broken."

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