SCN: Access

[Steve]

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=========================

Backbone Bullies: Beneath the Internet's happy communal culture, a cadre 
of giant carriers is mercilessly squeezing every last dime it can out of 
smaller players. Users are picking up the tab.  

by Neil Weinberg  

(Forbes)---John M. Brown runs IHighway, an Internet access firm in 
Albuquerque, N.M. He'd like to give his clients the fastest possible link to 
the rest of the Web world--but he can't.  

That is because Uunet and the few other giant data haulers that dominate 
Internet traffic don't have the fat, 45-megabit lines Brown would like in 
Albuquerque. And Brown can't afford $120,000 a year to lease a pipe 
running 330 miles to the Uunet hub in Phoenix.  

Without Uunet, a Net service can slow to a crawl. An e-mail from one of 
Brown's clients must pass through a poky, clogged--but mostly free--
"public" access point in California, rather than zip along the snazzy but 
expensive Uunet hub. Messages back up. Web pages wither. Forget 
streaming video.  

"It frustrates the hell out of me," Brown says. "When I ask big providers for 
local service, they're blasé." 

But in Internet traffic, the big guys--WorldCom's Uunet, Sprint Corp., Cable & 
Wireless, AT&T and GTE unit Genuity--are the only game in town. They 
control 80% of long-haul traffic. Uunet alone zaps perhaps half of the 
world's Net bits, and 30% of all Web sites transmit their pages on Uunet's 
300,000 miles of fiber.  

This concentration could get even worse, for WorldCom is trying to acquire 
Sprint and its 30,000-mile fiber network. Here's the rub: These few 
behemoths have a cozy arrangement for swapping traffic free-of-charge 
among themselves--but they charge stiff fees for the very same service 
when dealing with smaller players.  

The practice is a stark departure from how the Internet worked its first three 
decades, when networks handled one another's data for free under a 
communal love-in known as "peering." It threatens to balkanize the Net into 
haves and have-nots.  

A balkanized Net is just what the government hoped to avoid when it 
privatized it in 1994 and bestowed special rights upon the cadre of Net 
titans. Their brazen ways risk riling antitrust regulators, still giddy from 
smacking around that rapacious monopolist, Microsoft.  

"The only way to get access to their part of the Net is to pay them a tithe, 
and to that extent it's a classic monopoly," says Paul Vixie, head of Internet 
services for Metromedia Fiber Network, which is building its own network. 
"The playing field isn't level. The people who got in first got all the best 
land and now dictate peering terms to everyone else."  

Forget the hype about the Internet as an egalitarian cyberparadise. Behind 
the warm and fuzzy facade is a merciless commercial hierarchy ruled by an 
oligopoly of carriers as indispensable as the local electric company--but 
with the clout to act like a bunch of bullies.  

The big carriers serve whom and where they want and require everyone 
who deals with them to keep the terms secret. Nor do they have to fear 
competition from their most formidable natural rivals, the regional Bell 
companies, because the Bells are barred from carrying traffic long distance. 
 
The biggest firms spend billions on their massive fiber infrastructures, and 
it is simply good business to pass along costs and earn a respectable 
return. The question is whether, given their dominance of what is arguably a 
vital public network, they could end up being seen as exploiting their 
position with impunity and draw government scrutiny.  

"It's about someone giving as much traffic as they're getting," says 
Kathleen Earley, president of AT&T's Internet group. "No business with 
shareholders can have asymmetric peering relationships. There would be 
no way to earn a return and upgrade your backbone."  

As it stands, puny ISPs pay for services without a clue about how the terms 
compare. There aren't any publicly disclosed rules for who rides free and 
who must pay, or for what are reasonable rates; a data "packet" can travel 
over several networks, and some peer while others pay.  

"The last thing the big guys want is to rationalize the system and 
commoditize themselves out of business," says Paul McBride, chief 
financial officer of InterNap, a builder of systems that bypass peering 
points. "The problem is the Internet won't scale this way forever."  

Bad as the system is, regulators have shied away from this arcana. But 
they could yet feel compelled to act. When MCI merged with WorldCom two 
years ago, the European Commission forced the pair to spin off MCI's 
Internet backbone. Cable & Wireless paid $1.75 billion for it--then later sued 
MCI WorldCom for trying to hamstring the business by withholding 
contracts, blocking database access and failing to transfer key people. 
WorldCom recently agreed to fork over $200 million to settle out of court.  

Two years later WorldCom is seeking to buy close rival Sprint. Sprint 
vociferously opposed the merger of WorldCom and MCI on antitrust 
grounds; now, of course, it sees no threat in merging into them. If the FCC 
and Department of Justice allow the deal to go through at all, they will likely 
demand a spinoff of part of the trio's Internet backbone. But WorldCom Chief 
Executive Bernard Ebbers has said he will scuttle the entire Sprint 
purchase before he will spin off Uunet.  

One look at WorldCom's pricing power shows why. The $875 per megabit 
that Uunet gets is double what smaller backbones fetch, says a local ISP. If 
a small ISP refuses to pay up, its users may suffer a World Wide Wait.  

The Internet got here via a peculiar history. Founded to keep military 
communications flowing after a nuclear attack, it was later turned over to the 
National Science Foundation. Amazingly, it began accepting commercial 
traffic only in the early 1990s. Early commercial users had to honor the 
peering protocol, swapping data free of charge. That way, all data could 
travel on all wires for free; any message could go to any recipient 
anywhere, whether the hauler was a multibillion-dollar powerhouse or a 
punky startup.  

Looking to get out of the way but prevent the fledgling Internet from 
fragmenting, the National Science Foundation paid four private enterprises 
in 1994 to build public Internet access points. The one in Washington, D.C. 
is now run by WorldCom; the site in San Francisco is Pacific Bell; Sprint 
has the hub in Pennsauken, N.J., and Ameritech the one in Chicago.  

They effectively became the Net's on-ramps in 1995 when the feds closed 
their own backbone. As traffic grew, these four public access points (and a 
fifth added in Palo Alto, Calif.) clogged up. The biggest and richest players 
responded by setting up hundreds of faster, private peering points.  

Then in 1997 Uunet said it would stop peering with small carriers; they 
would have to pay. Sprint and AT&T followed suit within months. The 
modern Net began to emerge. Titans swap traffic free and charge others; 
those who can't pay take the back roads of unreliable public exchanges. 
These days Cable & Wireless, for one, peers with just 52 carriers; the other 
10,000 or so ISPs must pay the freight.  

In a sense, the NSF's nightmare has come to pass: The Net is balkanized.  

Yet the big guys can't tread too heavily. Given the Net's collectivist past 
and regulators' unease with concentration, they haven't abandoned peering 
altogether. But in reality, the large backbone carriers have the clout and the 
incentive to make "public" interchanges as onerous as they can.  

In the past two months WorldCom has slapped smaller carriers with 
monthly fees that have run to tens of thousands of dollars, merely for 
locating their gear inside the public-access facilities that WorldCom 
manages.  

The difference between public and private access is jolting. Sprint runs 
much of its backbone at a blinding 2.5 billion bits per second--but at the 
public access point it oversees, it offers just 45 million bits. It is like giving 
drivers on a six-lane highway access via a dirt road.  

"The public peering points are by design bottlenecks," says Scott Hiles, 
Sprint's network operations manager. "We've moved to private peering."  

That's great for other networkers--unless, of course, they are too small or 
too far away to be admitted to the club.

Copyright 2000 Forbes.com





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