Subject: partial summary of Cook Report Findings on where Internet Policy could be headed policy headed

From: Gordon Cook <[email-masked]>
Date: Wed, 11 Jul 2001 00:45:48 -0400

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The COOK Report on Internet  September 2001 (Vol. 10, No. 6)
(c) COOK Network Consultants
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CONTENTS Full text of executive summary is also available at 
http://cookreport.com/10.06.shtml

The Internet's Dilemma: What Good Is the Stupid Network If the Other 
Guys Own It?
Future to Offer Access to a Public Highway Grid or Exile to Corporate 
Controlled Walled Gardens and OS'?

An Analysis by Gordon Cook		pp. 1-7

Broadband in Canada
Enabling Local Control of Local Infrastructure
A Pragmatic Regulatory Approach to Enabling Community Fiber Networks 
and Commercial Interconnection

by Francois Menard		pp. 8 - 12

Executive
Summary:

The Internet's Dilemma: What Good Is the Stupid Network If the Other 
Guys Own It?
Future to Offer Access to a Public Highway Grid or Exile to Corporate 
Controlled Walled Gardens and OS'?

We take a detailed look at how most all of telecom companies except 
for the ILECs fell off the precipice.  We conclude that without 
intelligent public policy designed to act as a counterweight to the 
ongoing consolidation of the "free-market" the AOL/Time Warner 
"Walled Garden" business model of the Internet may well become 
dominant.  We need to make understanding and emulating the Canadian 
approach to enabling the building of community owned fiber networks a 
high priority.  We find and conclude that:

1. Classic industrial age business cycle has overtaken information 
age infrastructure build and brought with it oversupply and slump.

2. Matched against big business practice and philosophy, edge control 
is no control.  Edge control has no defensive capability and thus is 
ripe for takeover and top down control.

3. Vertical top down control, ownership and integration of networks 
squeezes liquidity up and out of the entire system.

4. We need to understand fully the implications different economic 
models for the Internet. Is the Internet to be understood as composed 
of thousands and hundreds of thousands of local private enterprises 
and municipalities at every layer of the global network who operate 
under local democratic regulation, or is it to be seen as a cartel of 
12 or so intertwined global media and distribution corporations who 
control and staff their own nominal regulators at ICANN and WTO.

5. While in an abstract sense the distinction is still quite clear, 
the failure of 96 Telecom Reform Act blurred the Nethead vs. Bellhead 
split.  It can be said that we now have mainly companies with varied 
degrees of bell headedness.

6. The technologies which once defined the ideologies are themselves 
converging both in applicability and in price. This convergence is 
another driver of the above "blurring". Everyone is using a varied 
mix of technologies that were formally understood as particularly 
Netheaded or Bellheaded.

7. The Nethead ideologues were like settlers of the early American 
frontier west. And when the railroads pushed through and established 
towns and sufficient presence and support infrastructure and 
enforcement personnel, the frontier was brought to heel.

8. The regulatory playing field of ILEC versus CLEC that was created 
by the 1996 telecom act was in fact tilted on behalf of the ILECs and 
the inability of the FCC to enforce opening of local markets to 
competition.

9. Netheaded, green field, would be first movers borrowed vast sums 
for their fiber build outs driven by flawed estimates of bandwidth 
growth which, if accurate,  would have given a successful first mover 
great payoffs. The result looks like a glut and the inability of the 
would be first mover to get enough cash flow to pay their debts.

10.The ILECs out lobbied, outspent and outsmarted the builders of the 
Greenfield fiber plays and the Internet

11. There will be a fiber fire sale. The questions are who will be 
allowed to buy? Will there be *any* public interest test, any 
monopoly or anti-trust test or regulation, any access or control or 
preference given to the localities in whose earth the fiber runs, and 
whose residents and business and institutions are the logical first 
choice to benefit from this fire sale?

12. The traditional American model has been that of local and 
individual ownership and local and individual responsibility for the 
physical necessities of life. Our telecommunication policy has 
abandoned these ideals.

13. Yet we define telecommunication as a necessity and then through 
the Schools and Libraries corporation part or the universal service 
fund extract money from the community for use by distant corporations

14. We need a national debate on problems of media concentration and 
distribution channel monopoly versus the feasibility of community 
owned and operated alternative infrastructure.

15. The struggle is aimed at control a technology that is most 
fertile if uncontrolled.  The way things are headed the struggle for 
control may kill the "golden goose."

16.  Are we to have networks with end to end connectivity that we can 
use in ways that we see fit  rather than have our usage subject to 
the rules of a central authority? Can a "private vehicle/highway" 
model survive alongside the "railroad model?'

Broadband in Canada
Enabling Local Control of Local Infrastructure
A Pragmatic Regulatory Approach to Enabling Community Fiber Networks 
and Commercial Interconnection pp. 8-12

We publish an essay by Francois Menard. What Menard convincingly 
shows is that, given intelligent use of regulatory power, 
discriminatory interconnections and unfairly priced rights of way do 
not have to remain undue barriers to broadband. Menard demonstrates 
how communities could force the aggregation of demand onto the same 
infrastructure.  He illustrates why doing so will be a necessary 
precondition for any sound business case for fiber to the business or 
fiber to the home.  While local loop monopoly  regulations have 
forced aggregation of demand in a way that sustains the PSTN. He 
shows how demand aggregation can be achieved on a fiber optic 
infrastructure without requiring that a utility be given a monopoly 
on services.

He argues that the necessary preconditions for broadband can only be 
truly realized when end-users can directly influence what equipment 
is attached to the infrastructure, which requires that dedicated 
infrastructure, such as customers owning rights to specific fiber 
optic strands within the same cable.  He doesn't discount the use of 
wave division multiplexing, frequency division multiplexing, time or 
code division multiple access or even optical packet switching 
equipment, but warns that any use of such technology constitutes what 
he calls "service-defining bottleneck facilities".  He argues that 
owners of networks must mandate that physical open access be provided 
at the location of every such service-defining bottleneck facility. 
This is necessary, he suggests so as to enable other carriers to 
bypass such bottleneck facility, in order not to have imposed on them 
a certain type of service or business model.  Regulators of the 
facilities based competition model are missing this point and are 
relying on what in fact constitutes discriminatory interconnections.

Just as it is seen as a proper and accepted role of government at 
local, regional and national level to set the rules for building and 
use of physical highways and the clover leafs by which they 
interconnect, so  should government, from the community upward, 
determine the rules for building and interconnection of fiber based 
packet data networks.  While the current system protects the 
interests of ILEC stockholders, it may only bring broadband "walled 
gardens" to most customers several decades from now.  Menard contends 
that regulators are too busy with working the bugs out of regulations 
that are supposed to enable local competition in telephony. 
Consequently, they are unaware that they have the ability to ensure 
that we do not miss out on the opportunity, feasible today, of 
bringing broadband to everyone.  What Menard describes is the 
technology and regulatory approach that will enable communities to 
extend fiber to government, schools and business, and then to homes 
immediately.

The architecture that Menard advocates would bring the fiber strand 
from the individual business or residence to the nearest carrier 
neutral co-location site where the owner of the strand could choose 
what services he or she wished to be connected to.   The use of new 
technology such as high density ribbon cables and patch panels, 
micro-tubing and the ability to blow fiber through conduits would 
enable cost effective build outs.  Investigation is underway to 
determine what the exact costs and best architectures are likely to 
be.  The point is that in Canada there is now a regulatory impasse 
where CLECs have been given mandated access to unbundled network 
elements at discounted prices while they build out their networks. 
The discounts were to end within five years.  However seeing that the 
objectives are not being achieved, the regulators have extended the 
discounts indefinitely - an act that deprives the CLECs of the very 
incentive necessary to build competitive infrastructure.  In this 
essay Menard argues that it is time to throw out the current 
approach, adopt well defined standards of interconnection and 
encourage communities to act as referees of equal access to their 
rights of way. [Note: The preceding text also appears as part of this 
article's introduction.]

Two quotes from the essay: "What now appears to be needed from 
telecommunications policy are regulations which will favor the 
aggregation of end user demand onto a single fibre optic community 
network. But regulations must also explicitly mandate the 
disaggregation of services by enabling customer-owned physical-layer 
equal access onto carrier-neutral facilities.  In other words every 
carrier can offer its own set of services while being unable to 
prevent a competitor from offering a completely different set.

Furthermore, this regulation should call for municipalities to 
provide for the support structures necessary for customer-owned fibre 
optic strands under cost recovery principles similar to those of 
other municipal infrastructures. It is to be expected that some 
municipal administrations will be less interested than others in 
venturing into providing telecommunications support structures. 
Therefore it will be necessary for regulators to get an explicit 
mandate from the government to be able to regulate how cities are to 
be compensated when carriers are required to acquire rights of ways 
and build their networks should the municipality not be willing to do 
it."

Finally, we have written a more generalized set of findings based on his essay.
1.  Broadband is an essential public utility.  Access is only half 
the broadband issue.  The other half is end user (consumer choice) of 
service model at the point of access.

2.  The regulatory model for existing cable and copper last mile 
loops was conceptually flawed and has failed enable any over build of 
new technologies.

3.  While regulated carrier competition has failed, however, private 
local networks are being built by municipalities and local schools. 
These local public infrastructure networks could become well placed 
to provide service as a competitive market alternative to the current 
monopoly telco and monopoly cable incumbents, particularly in areas 
that the monopoly incumbents refuse to serve with high speed access, 
or with choice.

4.  When the broadband market fails because of monopoly, the local 
communities have a duty to provide market alternatives to their 
residents and businesses.

5.  Canadian regulators are grappling with deployment and development 
issues at least two generations ahead of the current American 
telecommunications landscape.

6. To date Canadian school districts and municipalities have been 
building their own fiber networks.  To make the economic case for 
fiber to the home Canadian municipalities will have to take adopt a 
new model where the municipality no longer operates the network but 
instead uses its ownership of rights of way to become an impartial 
referee on behalf of equal access.

7. The ideal business, technical, and regulatory model places the 
municipality in charge only of guaranteeing what it has always 
guaranteed--public rights of way access and non-interference, and 
regulating which services  shall have access to the public Rights of 
Way and under what terms,  conditions and fees for use, including how 
they must mutually assist and coordinate with each other.  The 
technology enables the city's responsibility for maintaining physical 
equipment to be extremely limited, as would their billing for service 
model.

8. As in all natural monopoly/limited distributor situations, the end 
user cannot freely choose nor freely change distributor because the 
distribution channels are either prohibitively capital intensive or 
prohibitively spacially intensive.  Therefore, the physical interface 
to the consumer for these natural monopolies are best regulated and 
coordinated by the local municipalities, as several hundred years of 
time and experience in thousands of essential public utility contexts 
have shown.

9. The ancient public-private contract of monopoly and public grant 
of special easements and tax relief and tax funded public investment 
given to private telco corporations for 100 year old technology does 
not imply an eternal commitment by the public to support these same 
corporations as exclusive beneficiaries of public tax funded relief 
and assistance, when new technologies and new businesses develop 
which can serve the public in better ways and at lower cost.

10.  The 1996 regulatory model for encouraging market opening and 
active infrastructure competition has failed.  In Canada it has done 
better, but not a lot better.  And in hindsight we see that there is 
no business case to be made for any permissive regulatory framework 
that will effectively draw the ILECs into investing in full scale 
residential broadband, much less broadband choice. It is too much in 
the financial interest of the telcos and the cables to drag their 
feet forever.

11. In Canada careful review of rights of way agreements will uncover 
impacts on school and municipal networks that may be undesirable,  as 
well as finding that current RoW agreements favor incumbent telcos 
and cables.  RoW reviews should be comprehensively undertaken to 
favor broadband competition, consumer access, and consumer choice and 
municipal alternatives.

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