The telecommunications industry at a crossroads:Uncertain economics overpowermazy technological innovation

Master in Engineering Policy and Management of Technology

Instituto Superior Tecnico, Lisbon, Portugal

P. Ferreira

February 1st, 2002

Agenda

70 80 90 00 10

TCP/IP WWW

ARPANET NSF

Telecommunications Act

Local Loop

Backbone optics

Private ownership

FEDERAL FIRMS MARKET

CHALLENGES

1

2

3

4

The Early Days

• The cold war times: the ARPANET (’69)

• BBN (AS#1) (70s) and packet switching

• TCP/IP (’74) and the OSI model (80’s)

• The NSF backbone (early 90s)

1

Technology & Innovation

• The World Wide Web (‘89) and browsers (’93)

• Classless Inter-domain Routing (’91/’92)

• Border Gateway Protocol (’94/’95)

• Peering: Bill&Keep, Complex routing policies

2

Source: Matrix Internet and Directory Services (MIDS)

20000 6800 23000

30000

80000

30000400000

2300000

35000

Private Business

• The industry (infra-structure):• Quest: fiber deployment• Cisco: the routing oligopoly• AT&T: telephony and data businesses• Akamai: web-site mirroring and caching

• Services and e-business:• Amazon: sales front-end • eBay: general item auction • Vehix: automotive “vortal”• BandX: bandwidth trading

3

Private Business

• Telecommunications Act of 1996

• The current backbone: • Optical Networks and cross-connects (e.g. cost model)• Wavelength division multiplexing• Peering agreements and interconnection

• The access loop:• Unbundling and competition• Digital subscriber line and cable modems (e.g. cost models)• Wireless technologies

3

Future Challenges

• Pricing models:• Flat rate, Usage rate, Congestion rate

• Quality of service: IntServ, DiffServ, CBR

• Bandwidth trading:• Extreme competition with SLAs

• Moore’s law, direct linking, GigaPOPs

4

Conclusions(with an EP perspective)

policy

competition

unbundling

technology

backbone local loop

economics

80s

90s

00s

Mazy innovation

Overpowered byUncertain economics

Bibliography

• Technology:

• “ADSL Deployment”, David Pearahavailable at http://itel.mit.edu/xdsl/public/tprc-paper.pdf

• "A Rose by Any Other Name: Unbundling, Open Access and Cable Data Networks",Tseng et. al. available at http://itel.mit.edu/ under research, papers & publications, 2000

• “Wireless Networks in Europe: A three step evolution”, James Guytonavailable from www.murrow.org under publication/theses

• “Provision of sufficient transmission capacity for broadband mobile multimedia: a step toward 4G”, Manuel Dinis and Jose Fernandes, IEEE Communications special issue, August 2001

• “QoS Support for an all-IP system beyond 3G”, Tomas Robles et. al.IEEE Communications special issue, August 2001

Bibliography

• Technology:

• “Optical Networks and the Future of Broadband Services”, Ferreira et. al.Special Issue of Intl. Journal on Technological Forecasting and Social Change, available on the web at http://web.mit.edu/~pmf/www

• “Best Effort versus Spectrum Markets”, Lee McKnight, W. Lehr and R. Linsenmayeravailable on the web at http://www.tprc.org/tprc01/agenda01.htm

• “A broadband access market framework: towards consumer service level agreements”McKnight and Lehr, available at http://itel.mit.edu under publications/2000

• "Do Appliances Threaten Internet Innovation?", Gillett et. al. IEEE Communications special issue, October 2001

Bibliography

• Business models and industry:(for more info visit www.murrow.org)

Creative destruction: Internet telephony

Business survival strategies in MIT press - spring 2001

The global internet economy

MIT press – spring 2001

Internet economics

MIT press - 1998

Academic Research Sites

School of Information Management & Systemshttp://www.sims.berkeley.edu/

Information Network Institutehttp://www.ini.cmu.edu/

Internet Telecoms & Convergencehttp://itel.mit.edu

Program Research on Information Economyhttp://www.si.umich.edu/~prie/