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Measuring the Internet Economy: How Networks Create Value

- 1. Measuring the Internet Economy: How Networks Create Value Bill Woodcoc k Executive Directo r Packet Clearing House Version 1. 0 bdNOG1 3 June 10-12, 2021
- 2. Why Measure the Internet? Tactical reasons: To understand where the value of the product you’re selling comes from As input to calculating Average Per-Bit Delivery Costs (APBDC) So that you can bill your customers in di erent and more useful ways To optimize and plan network interconnection (peering and transit) Strategic reasons: So you’ll know your business when you talk with your regulator or customers To justify infrastructural investment and attention from policy-makers
- 3. Why Measure the Internet? Although economists argue about methodologies and speci cs, there’s general agreement that the Internet is responsible for a quarter to a third of new productivity in most OECD countries, and a double-digit percentage globally. It’s the responsibility of governmental policy-makers, of regulators, and of people in the involved industries, to understand and support such engines of growth. The Internet allows people without work to fi nd jobs, children to continue their education during a pandemic, businesses to receive orders and ful ll them. The economic activity produces tax revenue which pays for schools, roads, law enforcement, and healthcare. Regardless of whether individual customers appreciate the work that you do, society and posterity depend upon your work and its success.
- 4. Theodore Vail used the Network E ff ect to justify an AT&T monopoly in 1908. Value increases as a function of the number of users of a compatible product or service. In communications, value increases as a function of the number of other people who can be reached through a network. The Network Effect
- 5. The Network Effect Users: 2 Value: 1 Value per user: 0.5 Marginal value of next user: 2 Users: 4 Value: 6 Value per user: 1.5 Marginal value of next user: 4 Users: 6 Value: 15 Value per user: 2.5 Marginal value of next user: 6 Users: 5 Value: 10 Value per user: 2 Marginal value of next user: 5 Users: 3 Value: 3 Value per user: 1 Marginal value of next user: 3
- 6. The Network Effect Source: CAIDA
- 7. The Network Effect Network e ff ects apply not only to underlying communications infrastructure like ber cables, but at all layers of the network. Some examples: Layer 2: Ethernet adjacencies Layer 3: Global reachability with the Internet Protocol Layer 5: BGP route-servers like those which allowed the IXPs in Jakarta and Sao Paulo to so quickly outpace those of Europe and the United States Layer 8: Speakers of a common language, or people who share a common understanding of a scienti fi c principle
- 8. Internet Service Provider Lifecycle Phase 1: Simple Aggregator Single Transit Provider Customers ISP Network IXPs
- 9. Internet Service Provider Lifecycle Phase 1: Simple Aggregator Single Transit Provider Customers ISP Network IXPs Vertical connections are transit: service travels downward, money travels upward.
- 10. Redundant Transit Providers Customers ISP Network IXPs Internet Service Provider Lifecycle Phase 2: Redundancy & Efficiency
- 11. Redundant Transit Providers Customers ISP Network Single IXP IXPs Internet Service Provider Lifecycle Phase 3: Local Peering
- 12. Redundant Transit Providers Customers ISP Network Single IXP IXPs Horizontal connections are peering: bandwidth is exchanged, but money is not. Internet Service Provider Lifecycle Phase 3: Local Peering
- 13. Redundant Transit Providers Customers ISP Network Multipl e IXPs IXPs Internet Service Provider Lifecycle Phase 4: Diverse Peering
- 15. IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1
- 16. IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1
- 17. IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1
- 18. C C C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1
- 19. C C C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1
- 20. C C C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1 C C
- 21. C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 1 1 1 2 C C 1
- 22. C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP IXP 4 4 3 2 2 2 1 1 1 3 2 4 C C 1
- 23. C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP 4 4 3 2 2 2 1 1 1 3 2 IXP 4 C C 1
- 24. C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP 4 3 2 2 2 1 1 1 3 2 4 IXP 4 C C 1
- 25. C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP 4 3 2 2 2 1 1 1 2 3 4 IXP 4 C C 1
- 26. C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP 4 3 2 2 2 1 1 1 3 4 IXP 4 C C 1 2
- 27. C C C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1
- 28. C C C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1 Transit Cone Customers: 3 Value: 6
- 29. C C C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1 Transit Cone Customers: 5 Value: 15
- 30. C C C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1 Transit Cone Customers: 9 Value: 45
- 31. C C C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1 Transit Cone Customers: 16 Value: 136
- 32. C C C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1 Customers: 24 Value: 300 Transit Cone + Peering
- 33. Source: CAIDA
- 34. C C C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1
- 35. C C C C C C C C C C C C C C C C C C C C C C C C IXP IXP IXP IXP IXP 4 4 4 3 3 2 2 2 2 1 1 1 1 IXP IXP IXP C C C C C C
- 36. So What Do We Measure? The vast majority of bandwidth is produced in Internet exchange points. Bandwidth produced in IXPs comes from interconnections between participating networks across the switch fabric, or across passive ber crossconnects. Aggregate bandwidth produced on the switch fabric is typically a public number. The amount of bandwidth produced on private pieces of ber is known only to the two parties to each interconnection, but traceroutes will reveal whether the connection is occurring across the switch fabric or a private connection. A tiny remaining fraction of bandwidth is produced within transit cones, and traceroute analysis can identify this, but not quantify it, as well.
- 37. So What Do We Measure? The ratio of bandwidth produced through each of these three mechanisms is not directly measurable, for many reasons. The ratio of interconnections facilitated by each of the three mechanisms can be determined by analyzing traceroutes, but each of the three types have characteristically di ff erent tra ffi c capacities and average utilization. Di ff erent business practices and regulatory environments strongly a ect the ratios of tra ffi c generated using each mechanism: • Regulatorily-protected monopoly incumbents in many developing economies • Data-collection-driven preference for switching over crossconnects
- 38. So What Do We Measure? More speci fi cally, at exchange points, we sum the count of outbound bits across all ISP-facing switch ports. Not inbound, because that wouldn’t catch multicast, but would catch bogons and subsequently-mitigated DDoS. Not all ports, because that would double-count inter-switch tra c. If we want to get really fancy, we can deduplicate broadcast tra c, but there really shouldn’t be broadcast tra ffi c on an IX subnet.
- 39. So What Do We Measure? In an ISP network, measurement is used for both engineering and billing. We typically use fl ow-based measurement, in addition to summing bits in both directions at the peering and upstream transit edges. This allows a “local tra ffi c is free, international tra c is metered” two- category billing model. If you capture customer-facing port bit-counts as well, that enables a “on- net, peer, and transit” three-category model. Old-style customer-port-bit-count-only doesn’t allow di erentiated pricing, nor does it tell you which customers are costing you most.
- 40. What Questions Can We Answer? If we measure Internet tra ffi c comprehensively, ideally using both bit-counts and sparsely-sampled fl ows, we can answer many questions: • Which of our customers make us pro fi table, and which cost us money? • Is our country or region a net importer or net exporter of bandwidth? • Where is the bandwidth our users are consuming produced? • Where are the consumers of the bandwidth we’re producing? • Which protocols and applications are gaining momentum, and which are falling into disuse?
- 41. Thanks, and Questions? Bill Woodcoc k Executive Directo r Packet Clearing Hous e woody@pch.ne t https://pch.net