DevelopingThe Case for NRENs

(A BIT MORE)revised 08-October-2008

TF-MSP / TF-PRZürich 30 September 2008

John DYER

TERENA

John.Dyer@terena.org

Slide 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

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

Slide 3

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 › If NRENs do, will they die, be superseded by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

Slide 4

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)

Slide 5

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 ?

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 ?

Slide 7

NREN Traffic to External Networks

%T3 and %T4 in 2008, EU/EFTA

0%

5%

10%

15%

20%

25%

Mo

ldo

va

Ire

lan

d

Slo

vaki

a

Un

ited

Kin

gd

om

Ne

the

rla

nd

s

Isra

el

Sw

ed

en

Au

stri

a

Hu

ng

ary

De

nm

ark

Cze

ch R

ep

ub

lic

Be

lgiu

m

Fin

lan

d

Lu

xem

bo

urg

Bu

lga

ria

Sw

itze

rla

nd

Ice

lan

d

La

tvia

Be

laru

s

Ru

ssia

Cro

atia

Po

lan

d

Ma

lta

Ge

rma

ny

Italy

Mo

rocc

o

Sp

ain

%T3

%T4

› 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 ?

% E

xte

rnal Lin

k U

tilisati

on

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. 210-237http://www.dtc.umn.edu/~odlyzko/doc/networks.html

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 services4% Not physically possible unless all domains in path

participate4% Not economically viable57% Prefer to over-engineer the network12% Other reason

n=37

Slide 10

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

NREN Traffic to and from Commercial Internet 2007

0

10

20

30

40

50

60

70

80

90

100

T3

T4

% o

f T3

,T4

tra

ffic t

o/f

rom

C

om

merc

ial In

tern

et

Sit

es

Traffic Sources and Destinations

› 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+T2T3+T4

NREN sites

Traffic to/fromOtherGlobal

Internet

Externalcommunity

T otal IP traffi c g rowth on G É ANT2004-2008

0

2000

4000

6000

8000

10000

12000

14000

F eb-04

A pr-04

J un-04

A ug-04

O c t-04

Dec -04

F eb-05

A pr-05

J un-05

A ug-05

O c t-05

Dec -05

F eb-06

A pr-06

J un-06

A ug-06

O c t-06

Dec -06

F eb-07

A pr-07

J un-07

A ug-07

O c t-07

Dec -07

F eb-08

A pr-08

Tb

yte

per

mo

nth

total IP

E xpon. (totalIP )

Total IP traffic growth on GÉANT2004-2008

Total IPv6 traffic growth on GÉANT2004-2008

IP v6 g rowth on G É ANT2004-2008

0

20

40

60

80

100

120

140

F eb-04

Apr-04

J un-04

Aug-04

Oct-04

Dec-04

F eb-05

Apr-05

J un-05

Aug-05

Oct-05

Dec-05

F eb-06

Apr-06

J un-06

Aug-06

Oct-06

Dec-06

F eb-07

Apr-07

J un-07

Aug-07

Oct-07

Dec-07

F eb-08

Apr-08

Tb

yte

per

mo

nth

IP v6

Total IP and IPv6 traffic growth on GÉANT2004-2008

T otal IP & IP v6 g rowth on G É ANT2004-2008

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

11000

12000

13000

F eb-04 May-04 Aug-04 Nov-04 F eb-05 May-05 Aug-05 Nov-05 F eb-06 May-06 Aug-06 Nov-06 F eb-07 May-07 Aug-07 Nov-07 F eb-08 May-08

Tb

yte

per

mo

nth

IPv6 as a percentage of all IP traffic

GÉANT: Percentage IPv6 traffic

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%M

ar-0

4

May

-04

Jul-0

4

Sep

-04

Nov

-04

Jan-

05

Mar

-05

May

-05

Jul-0

5

Sep

-05

Nov

-05

Jan-

06

Mar

-06

May

-06

Jul-0

6

Sep

-06

Nov

-06

Jan-

07

Mar

-07

May

-07

Jul-0

7

Sep

-07

Nov

-07

Jan-

08

Mar

-08

May

-08

IPv6

/(IP

v4 +

IP

v6)

per

cen

t

EU/EFTA NREN Funding Sources

Graph 6.4.1 Income Sources, EU/EFTA Countries

0%

20%

40%

60%

80%

100%G

reece

Lithuania

Spain

Rom

ania

Slo

venia

Port

ugal

Esto

nia

Cypru

s

Slo

vakia

United K

ingdom

Fra

nce

Luxem

bourg

Belg

ium

Hungary

Irela

nd

Bulg

aria

Latv

ia 

Czech R

epublic

Sw

itzerland

Fin

land

Neth

erlands

Norw

ay

Sw

eden

Austr

ia

Germ

any

Italy

Denm

ark

Icela

nd

Users/Clients National government and public bodies EU Other sources

User/ClientFunding

SHORT TERMhorizon

Non-User/Client Funding

LONGTERMhorizon

Elements of NREN Activity

ProductionNREN Commodity Services

Innovative Development

DIRECT VALUE

SPILLOVERVALUE

INDIRECT VALUE

TOTAL NREN COSTS

NREN Users/Clients see VALUE

User funding appropriate

PUBLIC VALUE

Central funding

appropriate

Acknowledgements to: Donald Clark, REANNZ

Relating Reality to Economic Theory

Graph 6.4.1 Income Sources, EU/EFTA Countries

0%

20%

40%

60%

80%

100%

Gre

ece

Lith

uania

Spain

Rom

ania

Slo

venia

Port

ugal

Esto

nia

Cypru

s

Slo

vakia

Unite

d K

ingdom

Fra

nce

Luxem

bourg

Belg

ium

Hungary

Irela

nd

Bulg

aria

Latv

ia 

Czech R

epublic

Sw

itzerland

Fin

land

Neth

erlands

Norw

ay

Sw

eden

Austr

ia

Germ

any

Italy

Denm

ark

Icela

nd

Users/Clients National government and public bodies EU Other sources

100% Central Funding

Percentage User Charging0% 100%

Perc

en

tag

e U

ser

Ch

arg

ing

100% User Funding

optimaloutcomes

sub-optimaloutcomes

Optimal ratio ?

Simplified Principal-Agency Theory Transaction-Costs Economics1

2007 EU/EFTA NREN Funding Sources

1) Acknowledgements to: Donald Clarke, REANNZ

Scenarios

› Regulatory

› Commercial / Competition issues

› User/bill-payer funding issues

› Lack of Political Support

Slide 21

Regulatory

Slide 22

› 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

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

Slide 23

Users/Bill Payer Issues

SERENATE1 and EARNEST2 Studies found that a hybrid funding model predominates and is found to function well

Slide 241) SERENATE Summary Report, Dec 20032) EARNEST Summary Report, April 2008

ProductionNREN Commodity Services

Innovative Development

DIRECT VALUE

SPILLOVERVALUE

INDIRECT VALUE

TOTAL NREN COSTS

NREN Users/Clients see VALUEUser funding appropriate

PUBLIC VALUECentral funding

appropriate

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

Slide 25

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 . . . .

THE END