Developing The Case for NRENs (A BIT MORE) revised 08-October-2008

1. DevelopingThe Case for NRENs(A BIT MORE)revised 08-October-2008 TF-MSP / TF-PR Zürich 30 September 2008 John DYER TERENA John.Dyer@terena.org

2. Where did we get up tosince 18 May 2008? • DRAFT for DISCUSSION version 1 • www.terena.org/activities/tf-msp/documents/nren-case-v1.pdf • Suggestions at last meeting • Presentations in TNC 2008 • Discussions at the GA • Emails on the TF-MSP list • Compendium data and trends • Discussions with CEO of REANNZ

3. Major Suggestions from May TF-MSP/PR meeting • Different NRENs have different situations • Create a number of scenarios • What-if: Issues with Regulator • Commercial / Competition issues • Dissatisfaction from the user/bill-payer • Lack of Political Support • There are potential dangers in the environment in which we operate • Keep aware of regulatory, political & commercial impact of our portfolios may have

4. Presentations during TNC 2008 • some serious questions about the future of research networks. • Do NRENs need to develop more functionality? • Should NRENs think about a new business model? • Should NRENs remain separate from other (public) services? • If NRENs do, will they die, be superseded by the more rapidly developing commercial sector, or continue alongside as a niche market? • have to offer what people want, not necessarily the technology that is best

5. TERENA GA DiscussionsMay 2008 • “FREE” services - being used by NREN some customers • Are they really FREE? What are the costs, implications? • NRENs should make use of their position and explore new opportunities • Increasing NREN collaboration on Cross-Border-Fibres • Relies less on centralised international connectivity model • Requires common agreements on SLA, CP, AUP, Security • Connections becoming available at prices below those currently being paid in the NREN community • Procurement by NREN at national level is cost effective • NRENs are able to provide services tailored to the community • Users value the services • End-to-End community can sort out issues (PERT)

6. Email Discussions • We are here only to foster tele-informatic services in higher education and research • We found building a community is useful • Whenever services become mainstream pull-out • NRENs should be better and cheaper than the market? or • As the gap between ISP offering and NREN services closes in terms of price and capability NRENs should: a) compete on equal terms ? b) disappear ? c) re-think their role ?

7. Compendium 2008 findings • NREN Traffic • The NREN approach to QoS • Where is the traffic going • IPv6 rollout • Funding • Economic Models • Agency/Principal v Transaction Costs • Free market • Leading to the conclusion that • Competition is better than Cooperation ? • Hybrid Solution ?

8. NREN Traffic to External Networks    % External Link Utilisation     • Seven large net importers of data in EU/ETFA region  • In Europe most outbound traffic amounts to no more than ~10% of available link capacity • How does this compare with the Internet generally ?

9. Utilization • The backbones of the Internet are run at 10% to 15% of their capacity • Private line networks are utilized 3% to 5%. • low utilization of data networks is not a symptom of waste. • Low utilization rates lead to great opportunities for higher quality or less expensive service from aggregation of traffic. SOURCE: Andrew Odlyzko, University of Minnesota Data networks are lightly utilized, and will stay that way Review of Network Economics, 2 (no. 3), September 2003, pp. 210-237 http://www.dtc.umn.edu/~odlyzko/doc/networks.html

10. Compendium Survey on QoS • Does the NREN offer the same levels of QoS on the network as those offered by GÉANT2? • IP Best Efforts • IP Less than Best Efforts • Premium YES 24% NO 76% 7% NREN hardware is not capable 21% NREN sees no demand for these services 4% Not physically possible unless all domains in path participate 4% Not economically viable 57% Prefer to over-engineer the network 12% Other reason n=37

11. Why low utilization is necessary • Low utilization comes from different patterns of use, lumpy capacity of transmission facilities, and the high growth rate of the industry • Users value the ability to send data in high speed bursts, and that should guide us in the design and operation of networks • Also need to address end-to-end performance The last mile – application tuning… etc, Lightly loaded Saturated

12. NREN Traffic to and from Commercial Internet 2007 % of T3,T4 traffic to/from Commercial Internet Sites

13. Traffic to/from global Internet is legitimate NRENs may allow content providers to locate servers on their network to improve access to content Aggregation of Global Internet traffic and procurement of peering makes economic sense. T1+T2 NREN sites External community T3+T4 Traffic to/from Other Global Internet Traffic Sources and Destinations

14. Total IP traffic growth on GÉANT2004-2008

15. Total IPv6 traffic growth on GÉANT2004-2008

16. Total IP and IPv6 traffic growth on GÉANT2004-2008

17. IPv6 as a percentage of all IP traffic

18. EU/EFTA NREN Funding Sources Non-User/Client Funding LONG TERM horizon User/Client Funding SHORT TERM horizon

19. Production NREN Commodity Services Innovative Development INDIRECT VALUE SPILLOVER VALUE DIRECT VALUE TOTAL NREN COSTS PUBLIC VALUE Central funding appropriate NREN Users/Clients see VALUE User funding appropriate Elements of NREN Activity Acknowledgements to: Donald Clark, REANNZ

20. Relating Reality to Economic Theory Simplified Principal-Agency Theory Transaction-Costs Economics1 2007 EU/EFTA NREN Funding Sources Percentage User Charging 0% 100% optimal outcomes Percentage User Charging sub-optimal outcomes 100% Central Funding 100% User Funding Optimal ratio ? Acknowledgements to: Donald Clarke, REANNZ

21. Scenarios • Regulatory • Commercial / Competition issues • User/bill-payer funding issues • Lack of Political Support

22. Regulatory • Cooperative relationship • Example: FUNET • Converse • Example: SURFnet • Issues: • Requirements for data collection/retention and providing taps for agencies • NRENs are not public networks • Closed user groups with limited scope • Need the Freedom to Innovate successfully

23. Commercial / Competition Issues • No serious incidence of problems to date • NREN Position: • NRENs are not open public networks • Closed user groups with limited scope (R&E) • Occupy a niche not served commercially • Innovation for tomorrows Internet • Experts at integration of existing products into new and innovative pilot services • Cooperative with Industry for mutual benefit • Testbeds, equipment testing • Trickle down to commercial world and e-community

24. Production NREN Commodity Services Innovative Development INDIRECT VALUE SPILLOVER VALUE DIRECT VALUE TOTAL NREN COSTS PUBLIC VALUE Central funding appropriate NREN Users/Clients see VALUE User funding appropriate Users/Bill Payer Issues SERENATE1 and EARNEST2 Studies found that a hybrid funding model predominates and is found to function well SERENATE Summary Report, Dec 2003 EARNEST Summary Report, April 2008

25. Lack of Political Support • NRENs are not traditional public networks • Closed user groups with limited scope • Need the Stable Financial and Political basis to Innovate successfully • NRENs are a National Asset

26. In Summary • NRENs have an important job to do • Innovation • Pushing the boundaries • Leading the further development of the Internet • Enabling research and education to do their own jobs better • Enabling e-society • End-users & bill payers must see value in what NRENs offer • Else . . . .

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