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

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

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 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.

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

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 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

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 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 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 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 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 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? 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 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 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 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 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” 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 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)

Conclusions