From: ronda@ais.org (Ronda Hauben)
Subject: Summary of Cook Report on Commercialization of the Net 
Date: Fri, 08 Jan 93 21:18:34 EST
Organization: UMCC
X-Newsreader: TIN [version 1.1 PL6]

[ Article crossposted from umich.interesting.people ]
[ Author was Bernard.A.Galler@um.cc.umich.edu ]
[ Posted on 1 Jan 1993 12:43:34 -0500 ]

 
 
------- Forwarded message
>Date: Thu, 31 Dec 1992 20:59:46 -0500
>To: interesting_people@aurora.cis.upenn.edu
>From: Dave Farber <farber@central.cis.upenn.edu>
>X-Sender: farber@linc.cis.upenn.edu
>Subject: I have been hestitant to send too much of this type but this one is
>bound to cause some noise so .......
 
>Posted-Date: Thu, 31 Dec 92 19:28:34 EST
>Date: Thu, 31 Dec 92 19:28:34 EST
>From: cook@tmn.com (Gordon Cook)
>To: psi!com-priv@uunet.uu.net
>Subject: COOK Report v. 1 no 10 & 11: Summary History of NSFnet Privatizat
 
A special 35,000 word issue of the COOK Report on Internet -> NREN based 
on documents obtained from the National Science Foundation under the 
Freedom of Information Act will be published tomorrow.  The issue also 
contains extensive comments by NSFnet Director Steve Wolff (circa 2,000 
words) and many other reviewers.
 
The EXECUTIVE SUMMARY  from COOK Report Vol 1 Issues 10 & 11 FOLLOWS:  
(2,800 words)
 
NSFnet "Privatization" and the Public Interest:  Can Misguided Policy Be 
Corrected?
 
An Historical Review of Network Policy Making - 1989 to the Present With 
Pointers for Corrective Action
 
Executive Summary:
 
Part One:  MERIT, IBM and MCI Present ANS as an Offer the NSF Cant Refuse
 
With planning for an NREN going forward in Congress and competition there 
between the Department of Energy and the National Science Foundation for 
lead agency, the NSF had ambitious plans for continued growth of the 
NSFnet backbone. Unfortunately for it had little money with which to fund 
an upgrade to T-3 speed.  At some point in early 1990 with IBM in the 
lead, MERIT came up with a plan to create ANS as a non profit operator for 
a new high speed privatized commercialized backbone.  The NSF was asked to 
accept the privatization of the backbone by means of a realignment of the 
cooperative agreement with MERIT.  Short of terminating the cooperative 
agreement and the politically unthinkable course of immediately putting 
the backbone up for rebid, it had no other recourse but to accept the 
terms offered.
 
The design was immediately and grievously flawed for not only was there no 
plan for the privatization; there were no criteria by which to measure its 
success or failure.  Furthermore the design held unacknowledged economic 
implications -- for what was being privatized was the only part of the 
network that had no customers.
 
Part Two: Fallout of Privatization without a Plan: Contradictions Behind 
ANS Yield a Zero Sum Solution
 
Very quickly after ANS's creation it became apparent that ANS had one 
major aim in mind.  To raise the speed of the backbone to multi hundred 
megabit speeds within two years.  As ANS would explain to NSF, despite the 
fact that its sponsors had committed very large sums to bring their 
networks to SONET capability sooner than otherwise planned and produce 
gigabit switches as soon as possible on behalf of American 
competitiveness, ANS would nevertheless need large additional sums of 
money.
 
It would obtain this income largely from the one part of the American 
Internet that did have customers, the mid-level networks.  Although ANS 
listed 9 sources of revenue, it would obtain the money mostly in two ways. 
 First it would seek to detach from the mid-levels institutions that it 
thought it could better serve by direct attachments to its privatized 
backbone. Secondly, now that it was about to be granted the right to sell 
openly commercial use of the T-3 backbone it was building, it would 
develop plans to charge the mid-levels attachment fees to that backbone, 
as well as additional fees for sending commercial traffic across it.
 
ANS had spent much of the fall working with representatives from some 
mid-levels to determine the new criteria by which it expected to run the 
network if the NSF did not choose to rebid the backbone in 1992.  Although 
its plans for "Capital Infusion into the Backbone via Mid-level Network 
Fees and Settlements for Commercial Traffic," did not explicitly say so, 
if the mid- levels had to raise costs to their end users in order to pay 
the fees ANS imposed, so much the better because such higher costs would 
narrow the difference between what it charged for its direct connections 
and the generally less expensive fees charged by the mid-level networks. 
What was not clear was the extent to which the NSF would be bound to bail 
mid-levels out should ANS be successful in taking away sizable numbers of 
their customers.  Under these zero sum conditions, a win for ANS was a 
loss for the mid-levels.
 
In allowing ANS to sell direct access its own network (ANSnet) that used 
the same physical facilities as NSFnet, the NSF spoke of two virtual and 
presumably distinct networks.  It properly insisted that commercial 
traffic placed by ANS on its network not diminish bandwidth needed by its 
own customers.  However ANS's January 15 1991 Proposal to the NSF made 
clear that once dumped into the network packets from its commercial 
customers would be indistinguishable from those of the NSF's customers.  
Furthermore if the network became congested it would be almost impossible 
to ascertain whether the congestion resulted from academic or commercial 
use.  In ANS's own words: "there is no agreed to model for measuring 
congestion within an IP based network  At present, even the model of 
congestion determination described in the NSFnet solicitation of 1987 is 
not currently measurable by any tools that have been developed to date nor 
does there seem to be any work in the open literature suggesting that this 
is feasible."  ANS went on to say how it would estimate congestion.  One 
critic of the document said that it seemed to him that just as long as the 
counts of packets carried by the network kept going up ANS would be able 
to say that it had satisfied its part of the bargain.
 
The NSF was buying services from a new entity with an agenda more complex 
that just one of helping research and education. The NSF had assigned most 
of the control over the network to an entity that appeared determined to 
sell speed in the hope that the Fortune 1000 would climb aboard, and 
economies of scale would be achieved, which, it was said, would benefit 
the research and education sector.
 
Part Three:  Competing Designs for Commercialization ANS CO+RE versus CIX
 
In early 1991 while ANS prepared to charge mid-level networks connection 
and settlements fees, two of its commercial competitors and one mid-level 
formed the Commercial Internet Exchange and pledged to interconnect 
freely, and without settlements charges, all networks who wished to join 
and pay an annual $10,000 membership fee.
 
On May 24 1991 the NSF gave its blessing to a profit making spin off of 
ANS that would sell explicitly commercial use of the network backbone. 
While this was a privilege denied its commercial competitors, it was 
generally justified by assertions that ANS's sponsors, IBM and MCI, had 
spent far more on providing the network than they had received from the US 
government.  ($60 million total expenditure compared to $18 million in 
Federal funds was an estimate given by Steve Wolff the NSFnet Director in 
July of 1991.)  However a degree of doubt was cast upon this assertion in 
late 1992 when ANS's first Form 990 became available and showed 
expenditures for the backbone that roughly equaled income from Federal 
grants.
 
In his review of the Editor's study, NSFnet Director Steve Wolff pointed 
out that in asserting that he could find no evidence of cost sharing, the 
editor had ignored contributions in kind from MCI and IBM as well as ANS's 
"inheritance" from its sponsors. However a phone call to the IRS resulted 
in the statement that a properly and completely filled out Form 990 must 
list both contributions in kind and any "inheritance," used to perform the 
entity's program service activity.
 
While ANS made it clear that it was now interested in offering turnkey 
outsourcing for Fortune 1000 T-1 networks, critics suggested that its 
marketing task would be a difficult one because of security concerns 
raised by offering services based on Layer 3 sharing in an environment 
accessible to hackers.  By late 1992 it became apparent that offering 
services from a Layer 2 based backbone would be much more desirable from a 
corporate security point of view.  Such a positioning would allow the 
commercial service provider to sell both a Virtual Private Network (VPN), 
and access to the Internet -- the best of both worlds.  In the summer of 
1992 PSI would move to a frame relay based backbone and gain VPN 
capability, a move that would apparently be denied to ANS as long as it 
remained dependent on IBM routers.  ANS's strategy to expand dramatically 
the size of its network through corporate sales that would feed money into 
an infrastructure pool that would in turn benefit its research and 
education customers seemed to be facing some major handicaps.
 
Meanwhile ANS had been trying to get many mid-level customers to buy 
direct connections to it.  Not surprisingly this alienated to a greater or 
lesser degree most of the mid-levels.  In August of 1991, faced with the 
not easily understood cost impacts of the ANS Plan for Commercial 
Services, the mid-levels at a meeting of FARnet indicated that they wanted 
the NSF to stay in the backbone provisioning business in order to avoid 
what they feared would be tremendous fiscal uncertainty if ANS were left 
as the sole backbone proprietor when the cooperative agreement expired in 
November of 1992.
 
At the end of 1991 the impact of ANS's commercial backbone policy became 
clearer when Dialog was announced as ANS's first commercial customer and 
those mid-levels that had not yet signed the ANS connectivity agreement 
were blocked from connection.  This made the impact of ANS's exclusive 
right to move commercial traffic across the former NSFnet backbone 
apparent to all.  The resulting angry dispute made the New York Times and 
in January of 1992 Dialog was allowed to become an R&E customer of ANS so 
that it could be reached by the entire network.
 
Part Four:  Executive Summary Ignoring CIX and Courting Mid-Levels:  St 
Louis in April 92 and the Infrastructure Pool
 
In 1992, faced with pressure from the network community to give up its 
insistence on settlements and join the CIX, ANS agreed to connect to the 
CIX so that networks which were already CIX members could use its backbone 
to send data to the CIX.  It also decided to try to repair its relations 
with the mid- levels at a two day meeting in mid April attended by 
representatives from 20 mid-levels.  There ANS made an honest effort to 
deal with mid-level mistrust head on.  Glenn Ricart remarked that "ANS is 
unsure if it is in the wholesale or retail business -- being in both 
businesses simultaneously is confusing."  As an unfortunate result "we are 
all fighting over the 2% of the customers already connected rather than 
the 98% that are unconnected."  An unresolved issue, he concluded was 
"what is ANS going to be good at."  By meetings end ANS had promised "to 
clearly state its mission and goal (and then act accordingly) to help 
dispel the fog."
 
By November 1992 ANS CO+RE had been in existence almost a year an a half.  
While ANS had said that about half the mid- levels had signed connectivity 
or gateway agreements, it had never released their identities.  These 
mid-levels would be eligible to share in funds from ANS commercial usage 
fees gathered in an Infrastructure Pool.  In an interview with 
Communications Week, Al Weis had almost a year earlier estimated that the 
pool would be worth $250,000 by the end of 1992.  Questions were asked 
about the status of the Pool and the Resource Allocation Committee (RAC) 
designated to administer it.  The RAC was summoned for the first time via 
a telephone conference call on October 23, 1992.  Maintaining that the 
Pool and RAC were part of the profit making side of its operations, ANS 
took a position that it need not answer such questions.  Eventually 
however information about the RAC leaked out via a network discussion list 
and a December 4th article in Communications Daily.  The amount of money 
in the pool ($62,000) also leaked.
 
ANS had been asked by the attendees at the April 1992 St Louis meeting to 
hold a follow up meeting as soon as possible.  None has apparently so far 
been held.  (Some involved have said that they considered the RAC 
conference call to have served the function of the follow up meeting.)  
Nevertheless from communications with some of the mid-level directors who 
are members of the RAC, it is clear that at the end of 1992 ANS has 
managed to win some friends among the mid-levels.  However some mid-levels 
seem to have a foot in both the ANS and CIX camps.  And still others 
seemed determined to either join the CIX or try to remain independent of 
both camps.
 
Part Five:  Who's in Control?  Measuring Network Usage and Contribution to 
Infrastructure
 
>From FOIA evidence released by the NSF it seems that the NSF has had 
difficulty in ensuring responsiveness from MERIT and ANS.  In both 
September 1990 and May of 1991 the NSF had asserted that it would develop 
with MERIT a technical means of verification that "the attachment and 
service sponsored by the NSF under MERIT's Cooperative Agreement with the 
NSF is not diminished."  In early November 1990 the author publicly asked 
the NSF to disclose the means of verification agreed upon.  The NSF was 
silent.  Finally in November 24, 1992 it received from MERIT a four page 
letter containing the compliance plan. As with the first plan proposed by 
ANS in January 1991, it made it very plain that, once in the network, NSF 
and ANS traffic were indistinguishable.  It proposed that some benchmark 
measurements be used to determine when links were congested and needed 
upgrading.  However in any given instance it would be nearly impossible to 
tell whether network congestion would be due to supercomputer center 
traffic or traffic from Perot Data Systems, a large ANS commercial 
customer, to use an arbitrary example.
 
Finally when in November 1992 the author asked what infrastructure ANS had 
contributed to the network that had not been paid for by the National 
Science Foundation, an ANS vice president sent Steve Wolff a lengthy 
listing of ANS contributions.  However, in the opinion of the author they 
were almost entirely contributions that were absolutely necessary to 
deliver the minimally acceptable backbone service for which the NSF had 
been paying in the first place.
 
Part Six:  Where Do We Go from Here?
 
It has been too easy to confuse the network goal of technology development 
and transfer with that of access for all Americans to what should become 
the most powerful infrastructure of the information age.  The current 
arrangement places the network in the hands of ANS, an entity that has 
shown itself to be far more interested in technology development and 
transfer than in the cost of access for the ordinary user.
 
With its recently announced intention of support a scaled down backbone 
that connects on the four NSF supercomputer centers, the NSF appears to be 
heading in the right direction.  However, given the contradictions that 
ANS faces between its profit making, commercial, proprietary side and its 
non profit research and education side, it seems unlikely that ANS would 
be able to use further stewardship of the backbone in such a way that it 
would unambiguously benefit the research and education community that the 
NSF is intended to serve. Therefore the NSF would be well advised to 
evaluate with great caution any ANS responses to its backbone 
solicitation.  The NSF should also take a very wary approach to cost 
sharing suggestions and should not under any circumstances permit the 
successful bidder to resell commercially AUP free backbone bandwidth.
 
It is questionable whether the US government should be involved in the 
building of a production backbone.  What the new administration must make 
clear is that it will do whatever is necessary to ensure affordable access 
to the network.  It must also help to educate Congress concerning the 
policy implications behind the network by supporting Senator Breaux's call 
for a Presidential Commission on Telecommunications Policy.
 
---------
 
PS.  I may in a few days make available by email request 20 kilobytes or 
so of directed excerpts from the FOIA materials.
 
Directed?  I meant to type direct excerpts.
 
 
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