Bandwidth as Commodity

TwoSticks writes "This NY Times article (CT:required annoying but free registration) and one at Yahoo talk about the Enron corporation working to set up a market for bandwidth, similar to the existing markets for buying and selling gas and electricity, but with transaction times in seconds. They claim this is essential for next generation network management, and I'm inclined to agree. "

Comments

A vision of the future of bandwidth

[RebornData]

Bandwidth bartering is a little silly today, given the high cost and low speed of residential local loops. But imagine how things will change if local loop / MAN connectivity (Metropolitan Area Network) starts resembling a LAN more than a WAN (fast, ubiquitous and cheap).

First off, it's likely that your average person will have a much higher local connectivity speed than they could expect to use for free over the WAN. This is not the case today- the Internet WAN is SO much faster than most people's MAN connection (their analog POTS modem) that there's a reasonable expectation that you can get a MAN speed connection between any two points on the Internet WAN without paying extra. This will not be the case as the multimegabit MAN becomes a reality. I can't expect to get a 2Mb/s connection from my home in Houston to my Dad in Chicago for "free".

However, both producers and consumers of content and network-based applications will want to be able to take advantage of that new MAN speed, and are likely to be willing to pay for it. This creates a market for guaranteed quality bandwidth from point to point. In the consumer market, this need is likely to be on-demand. If I decide I want to "rent" a streamed episode of the Simpsons from the Fox website, I'll be happy to pay a few extra cents for a guaranteed quality connection for the time I need it to watch the show. This won't negate the need an unguaranteed Internet like we have today, but will create the financial motivation to introduce guaranteed QOS either through separate parallel networks or some sort of traffic prioritization. I believe Enron is building a parallel network.

This dramatically changes the economics of the WAN bandwidth. Right now, both information distributors and consumers share the cost of WAN connectivity by paying to connect to an "upstream" Internet provider. The producer pays it directly, and the consumer pays it as part of their ISP bill. However, in a world where high quality bandwidth is requested and paid for on demand, this cost burden must shift to the producer entirely since it's the producer who is providing the on-demand service and will be able to pass the costs of that on-demand bandwidth to the end user directly (or subsidize it with advertising).

As the guaranteed QOS WAN bandwidth companies begin to compete for the business of the producers, it becomes critical that they be able to promise nearly universal reach; to be able to connect to as many consumers as possible. So they will be motivated to connect to as many of the local loop providers (local ISPs) as possible. This won't happen if the local loop provider has to pay for the WAN connections, so companies like Enron will offer connectivity to ISPs for free or even pay them for the right to reach their subscribers.

So in the new world, it works like this. A content or application distributor will connect to some sort of MAE-like bandwidth trading facility and buy WAN connectivity from the various WAN vendors located there. At first, the bandwidth units will be traded in large chunks, but it will become more and more granular as routing protocols evolve and dynamic financial-cost routing and accounting becomes more practical. The content producer will either charge the customer for the content and delivery bandwidth, or will pay for the services via advertising. The consumer's ISP will be paid by these WAN bandwidth companies for the privilege of reaching the consumer, who may end up paying nothing for their MAN connection (similar to the TV broadcast model).

Enron is betting the farm that this will happen. They're investing big bucks in building this huge fiber network in anticipation of providing this service, and they are already hooking up to local ISPs to make it possible.

At least, this is how I read it. What do y'all think?

But there's two loose ends

[hawk]

This is one of my areas of economics . . .

There is fundamental differences between this and other commodities markets, even the newer ones such as electrical distribution. Electricty or gas, once you get it there, is the same regardless of where it came from. Bandwidth, on the other hand, is the "getting there" portion of this. Electricity *can* be moved from Boston to San Francisco, and so can gas, by bumping the gas along the way (though it's not the same in & out).

But bandwidth is always betwen A&B, and the only way to replace this is A->C->g->B. If you don't have ends at A & B, you just can't do it.

Some type of commoditization is certainly possible, but I've alwasy assumed it to be through a semi-intelligent part of the packet that chooses a path as it goes based on the cost& lag of each path

The chronological problem isn't to bad; it's been solved for electricity--you buy howevermany gigawatts for 2 pm on thursday, just as bandwidth would be. But there's those two loose ends of the path that need to be dealt with for bandwidth . .. .

This needs software agents

[Kaa]

First of all, I don't believe the infrastructure to buy and sell bandwidth is in place yet, at least for arbitrarily located machines. This is being worked on, for sure, but in general case I don't think you cannot buy or sell anything but what is essentially a leased line.

Second, for this to work well, we need some kind of micropayments structure in place, plus reasonably intelligent software agents that would be able to go out onto the net and buy bandwidth for us when we need it. I don't see this happening in the near future. In five years we'll see.

Besides, there is a book (IIRC called "Virtual City", but I am not sure) that very well describes a similar system where you buy remote processing power in micro-chunks on the as-needed basis. The book is recommended, by the way, it explores the consequences of being able to transfer human consciousness into a piece of software.

Kaa