As per Relevance of the word regional, we have this rfc below:
Network Working Working Group B. Kahin,
Request for Comments: 1192
November 1990
Commercialization of the
Summary
Status of this
This memo is based on a workshop held by the Science, Technology
Public Policy Program of the John F. Kennedy School of Government
Harvard University, March 1-3, 1990.
This memo provides information for the Internet community. It
not specify any standard. Distribution of this memo is unlimited
"The networks of Stages 2 and 3 will be implemented and operated
that they can become commercialized; industry will then be able
supplant the government in supplying these network services." --
Federal Research Internet Coordinating Committee, Program Plan
the National Research and Education Network, May 23, 1989, pp. 4-5.
"The NREN should be the prototype of a new national
infrastructure which could be available to every home, office
factory. Wherever information is used, from manufacturing to high
definition home video entertainment, and most particularly
education, the country will benefit from deployment of
technology.... The corresponding ease of inter-
communication will then provide the benefits associated with the
to the entire nation, improving the productivity of all information
handling activities. To achieve this end, the deployment of
Stage 3 NREN will include a specific, structured process resulting
transition of the network from a government operation a
service." -- Office of Science and Technology Policy, The
High Performance Computing Program, September 8, 1989, pp. 32, 35.
"The National Science Foundation shall, in cooperation with
Department of Defense, the Department of Energy, the Department
Commerce, the National Aeronautics and Space Administration,
other appropriate agencies, provide for the establishment of
national multi-gigabit-per-second research and education
network by 1996, to be known as the National Research and
Network, which shall
(1) link government, industry, and the
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RFC 1192 Commercialization of the Internet November 1990
community
....
(6) be established in a manner which fosters
maintains competition and private sector investment in
speed data networking within the
industry
....
(8) be phased out when commercial networks can meet
networking needs of American researchers."
-- S. 1067, 101st Congress, 2nd Session, as marked up April 3, 1990
["High-Performance Computing Act of 1990"], Title II, Section 201.
This report is based on a workshop held at the John F. Kennedy
of Government, Harvard University March 1-3, 1990, by the
Science, Technology and Public Policy Program. Sponsored by
National Science Foundation and the U.S. Congress Office
Technology Assessment, the workshop was designed to explore
issues involved in the commercialization of the Internet,
the envisioned National Research and Education Network (NREN).
Rather than recapitulate the discussion at the workshop, this
attempts to synthesize the issues for the benefit of those
present at the workshop. It is intended for readers familiar
the general landscape of the Internet, the NSFNET, and proposals
plans for the NREN
At the workshop, Stephen Wolff, Director of the NSF Division
Networking and Communications Research and Infrastructure
distinguished "commercialization" and "privatization" on the basis
his experience developing policy for the NSFNET. He
commercialization as permitting commercial users and providers
access and use Internet facilities and services and privatization
the elimination of the federal role in providing or
network services. In principle, privatization could be achieved
shifting the federal subsidy from network providers to users,
spurring private sector investment in network services. Creation
a market for private vendors would in turn defuse concerns
acceptable use and commercialization
Commercialization and
Commercialization. In the past, many companies were connected to
old ARPANET when it was entirely underwritten by the
government. Now, corporate R&D facilities are already connected to
and are sometimes voting members of, mid-level networks. There
mail connections from the Internet to commercial services such
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RFC 1192 Commercialization of the Internet November 1990
MCIMAIL, SprintMail, and Compuserve. DASnet provides a
mail gateway to and from the Internet and commercial mail services
UUNET, a nonprofit corporation, markets TCP/IP services (Alternet
with access to the Internet as well as mail services.
Systems International (PSI), a startup company which now
NYSERNET (the New York State regional network, partially funded
NSF) is aggressively marketing Internet-connected TCP/IP services
the East and West Coasts. RLG is selling access to its RLIN
over the Internet directly to end users. Other fee-based
include Clarinet, a private news filtering service, and FAST, a non
profit parts brokering service. However, in all these cases, any
of the NSFNET backbone must, in principle, support the "purpose
the NSFNET."
Under the draft acceptable use policy in effect from 1988 to mid
1990, use of the NSFNET backbone had to support the purpose
"scientific research and other scholarly activities." The
policy promulgated in June 1990 is the same, except that the
of the NSFNET is now "to support research and education in and
academic institutions in the U.S. by access to unique resources
the opportunity for collaborative work." Despite this limitation
use of the NSFNET backbone has been growing at 15-20% per month
more, and there are regular requests for access by
services. Even though such services may, directly or indirectly
support the purposes of the NSFNET, they raise prospects
overburdening network resources and unfair competition with
providers of network services (notably the public X.25 packet
switched networks, such as SprintNet and Tymnet).
Privatization. In some respects, the Internet is
substantially privatized. The physical circuits are owned by
private sector, and the logical networks are usually managed
operated by the private sector. The nonprofit regional networks
the NSFNET increasingly contract out routine operations,
network information centers, while retaining control of policy
planning functions. This helps develop expertise, resources,
competition in the private sector and so facilitates the
of similar commercial services
In the case of NSFNET, the annual federal investment covers only
minor part of the backbone and the regional networks. Although
NSFNET backbone is operated as a cooperative agreement between
and Merit, the Michigan higher education network, NSF
less than $3 million of approximately $10 million in annual costs
The State of Michigan Strategic Fund contributes $1 million and
balance is covered by contributed services from the subcontractors
Merit, IBM and MCI
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At the regional level, NSF provides approximately 40% of
operating costs of the mid-level networks it funds -- with
remainder covered by membership and connection fees, funding
state governments, and in-kind contributions. This calculation
not include a number of authorized networks (e.g., PREPnet, and
until recently, NEARnet and CERFnet) that receive no NSF funding
However, NSF also funds institutional connections to the NSFNET
which includes payments by the institution to the regional network
Other agencies (DOD, NASA, and DOE) have also funded some
to NSFNET networks for the benefit of their respective
communities -- and have occasionally funded the networks directly
Finally, the campus-level networks at academic institutions
represent a perhaps 7-10 times larger annual investment than
mid-level networks and the backbone together, yet there is no
funding program at this level. Furthermore, since these
networks must ordinarily be built by the institution rather
leased, there is an additional capitalization cost incurred by
institutions, which, annualized and aggregated, is perhaps
20-50 times the annual costs of the mid-level and backbone networks
(These figures are the roughest of estimates, intended only
illustration.)
The NSFNET Backbone as a Free
Whereas the NSF funding of mid-level networks varies greatly --
0% to 75% -- the backbone is available as a free good to the NSF
funded mid-level networks. It is also used free of charge by
authorized networks, including networks not considered part
NSFNET: CSNET, BITNET, UUNET, and PSI, as well as the
networks of other federal agencies. As noted, their use of
backbone is in principle limited to the support of academic
and education
Through their use of the NSFNET backbone, these networks appear to
enjoying a subsidy from NSF -- and from IBM, MCI, and the State
Michigan. BITNET and some agency networks even use the backbone
their internal traffic. Nonetheless, these other networks
add value to NSFNET for NSFNET users and regional networks insofar
all networks benefit from access to each other's users and resources
However, small or startup networks generally bring in fewer network
based resources, so one side may benefit more than the other. To
extent that the mail traffic is predominantly mailing lists (or
information resources) originating on one network, questions
imbalance and implicit subsidy arise. For example, because of
mailing lists available without charge on the Internet, three
as much traffic runs over the mail gateway from the Internet
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RFC 1192 Commercialization of the Internet November 1990
MCIMAIL as from MCIMAIL to the Internet. This pattern is
by the sender-pays fee structure of MCIMAIL, which
mailing list distribution from within MCIMAIL
The impact of such imbalances is not clear. For now, the capacity
the NSFNET backbone is staying ahead of demand: It jumped from 56
Kbps to 1.544 Mbps (T-1) in 1988 and will go to 45 Mbps over the
year. But NSF is concerned about a possible recurrence of
congestion which drove users off the NSFNET prior to the 1988
upgrade. Given the tripling of campus-level connections over
past year, continued growth in users at each site, the parade of
resources available over the network, and, especially,
development of high-bandwidth uses, there is reason to fear
demand may again overwhelm capacity
Offering the NSFNET backbone at no cost to authorized networks
encourages undisciplined use of the backbone and inhibits
investment in backbone networks. It constrains the development of
market for commercial TCP/IP services by diverting an established
rapidly growing user base to a subsidized resource. Charging
regionals and other mid-level networks for the use of the
backbone would resolve this problem, but this would impose
substantial cost burden on the mid-level networks, which would
turn have to raise membership and connection fees dramatically.
compensate, the NSF subsidy that now underwrites the backbone
be moved down the distribution chain to the users of the backbone --
i.e., to the regional networks, to the campuses, or even
researchers themselves
Each option poses unique opportunities and problems. In theory,
further down the chain the subsidy is pushed, the more
providers will be to end-user needs. Funding in hands of
would make universities more responsive to researchers'
needs. Funding in the hands of universities would in turn
regional networks more responsive and competitive. And funds
regional networks would spur a general market for backbone services
But the mechanisms for expressing user demand upward through
tiers are imperfect. And, from an administrative standpoint, it
easier for NSF to simply provide one free backbone to all comers --
rather than deal with 25 mid-level networks, or 500 universities,
perhaps tens or hundreds of thousands of individual researchers
Option: Funding
It would be possible to earmark funds for network services in
research grants as a matter of course, so that no new
process would be required. But since network costs are presently
usage based, such funding will not readily translate
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RFC 1192 Commercialization of the Internet November 1990
identifiable services and may simply end up in local
accounts since few institutions allocate out costs of access to
Internet. The use of vouchers rather than cash add-ons might
ensure that federal resources are in fact applied to qualifying
area network services -- and possibly avoid the imposition
standard institutional overhead on direct funding. However,
vouchers can be sold to other institutions, as economists
advocate in the interests of market efficiency, these advantages
be compromised. Even non-transferable vouchers may create a
set of accounting problems for both funding agencies
institutional recipients
A federal subsidy channeled automatically to research grants
substantially limit or segregate the user community. It would
to divide the academic community by exacerbating obvious
between the resource-rich and resource-poor -- between
funded researchers and other researchers, between scientists
faculty in other disciplines, and between research and education
Within the academic community, there is considerable sentiment
providing basic network services out of institutional overhead
faculty and researchers in all disciplines, at least as long as
services remain unmetered and relatively low at the
level. Of course, special costing and funding may well make
for high-bandwidth usage-sensitive network services (such as
imaging) as they become available in the future
Option: Funding
Alternatively, funding for external network services, whether in
form of cash or vouchers, could be provided directly to
without linking it directly to federal research funding. As it is
institutions may apply for one-time grants to connect to
networks, and these are awarded based on peer assessment of a
of different factors, not just the quality of the institution'
research. But redirecting the subsidy of the backbone could
regular support at the institutional level in ways that need
involve peer review. For example, annual funding might be tied
the number of PhD candidates within specific disciplines -- or to
degrees awarded in science. Geographic location could be factored
-- as could financial need. This, of course, would amount to
entitlement program, a rarity for NSF. Nonetheless, it would
institutions to make decisions based on their own needs --
putting NSF in the position of judging among competing networks
nonprofit and for-profit
There are, however, questions about what sort of services
earmarked funding or vouchers could be used for. Could they be
to pay the institution's BITNET fee? Or a SprintNet bill? Or
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RFC 1192 Commercialization of the Internet November 1990
acquire modems? For information services? And, if so, what sort
Such questions force the funding agency to assume a kind
regulatory in an environment where competing equities,
need, technological foresight, and politics must be
weighed and juggled
Option: Funding Regional
Shifting the subsidy to the regional networks is appealing in that
appears to be the least radical alternative and would only
allocating funds among some two dozen contenders. Since most of
regional networks are already receiving federal funding, it would
relatively simple to tack on funds for the purchase of
services. However, providing additional funding at this
highlights the problem of competition among mid-level networks
Although most regional networks are to some degree creatures of NSF
funded to ensure the national reach of NSFNET, they do not
exclusive geographic franchises, and in some areas, there
competition between regionals for members/customers. NSF grants
regional networks, by their very size, have an effect of
the playing field among regionals and distorting
strengths and weaknesses
Alternet and PSI further complicate the picture, since there is
clear basis for NSF or other agencies to discriminate against them
The presence of these privately funded providers (and the
of others) raises difficult questions about what network services
government should be funding: What needs is the market now capable
meeting? And where will it continue to fail
Experience with regulation of the voice network shows that it
inefficient to subsidize local residential service for everybody.
one is concerned about people dropping off the voice network --
institutions not getting on the Internet -- the answer is to
and subsidize those who really need help. The market-
suppliers of TCP/IP-based Internet connectivity are naturally
after those markets which can be wired at a low cost per institution
i.e., large metropolitan areas, especially those with a
concentration of R&D facilities, such as Boston, San Francisco,
Washington, DC. In the voice environment, this kind of
marketing by unregulated companies is widely recognized as cream
skimming
Like fully regulated voice common carriers (i.e., the local
carriers), the non-profit NSF-funded regional networks are
to serve all institutions within a large geographic area. In
with few R&D facilities, this will normally result in
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RFC 1192 Commercialization of the Internet November 1990
disproportionately large investment in leased lines. Either
institutions must pay for the leased line to the nearest
point of presence -- or the network must include the leased line
part of common costs. If the regional network assumes such costs,
will not be price-competitive with other more compact networks
Accordingly, a subsidy redirected to the regional networks could
keyed to the density of the network. This might be calculated
number of circuit miles per member institution or some form
aggregate institutional size, figured for either the network as
whole or for a defined subregion. This subsidy could be available
both for-profit and non-profit networks, but only certain non-
networks would meet the density requirement, presumably those most
need of help
Increasing the Value of the
The principal advantage in underwriting the backbone is that
provides a evenhanded, universal benefit that does not involve NSF
choosing among competing networks. By increasing the value
belonging to a regional network, the backbone offers all
networks a continuing annual subsidy commensurate with their size
Increased value can also derived from access to
resources -- supercomputer cycles, databases, electronic newsletters
special instruments, etc. -- over the network. Like direct
of backbone, funding these resources would induce more
to join regional networks and to upgrade their connections.
example, where a database already exists, mounting it on the
can be a very cost-effective investment, increasing the value of
network as well as directly benefiting the users of the database
Commercial information services (e.g., Dialog, Orbit, Lexis)
serve this function well since they represents resources
available without any public investment. Marketing
services to universities over the Internet is permissible in that
supports academic research and education (although the
state that such commercial uses "should be reviewed on a case-by-
basis" by NSF).
But to date there has been remarkably little use of the
networks, let alone the NSFNET backbone, to deliver
information services. In part, this is because the
services are unaware of the opportunities or unsure how to market
this environment and are concerned about losing control of
product. It is also due to uneasiness within the regional
about usage policies and reluctance to compete directly with
packet-switched networks. However, for weak regional networks,
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RFC 1192 Commercialization of the Internet November 1990
may be necessary to involve commercial services in order to
and hold sufficient membership -- at least if NSF subsidies
withdrawn. Without a critical mass of users, commercialization
need to precede privatization
Impact of Removing NSF Subsidy from the
Any shift to a less direct form of subsidy may cause some
and distress at the regional network level -- until the
begin to be felt. No regional network has yet folded, and
institution has permanently dropped its connection to a
network as a consequence of higher prices, but concerns about
viability of some regionals would suggest that any withdrawal
subsidy proceed in phases
Moreover, as the NSF subsidy vanishes, the operation of the
becomes a private concern of Merit, the Michigan Strategic Fund, IBM
and MCI. While Merit and the Michigan Strategic Fund are more
less public enterprises within the state, they are
private entrepreneurs in the national operation of a
network. Without NSF's imprimatur and the leveraging federal funds
the remaining parties are much less likely to treat the backbone as
charity offering and may well look to recovering costs and
revenues to expand service
The backbone operation could conceivably become either a nonprofit
for-profit utility. While nonprofit status might be more
to the academic networking community now served by the backbone,
is not readily apparent how a broadly representative
corporation, or even a cooperative, could be constituted in a
its many heterogeneous users would embrace. A non-
organization may also have difficulty financing rapid expansion
services. At the same time, the fact that it will compete
private suppliers may preclude recognition as a tax-
organization -- and so its ability to reinvest retained earnings
Operation of the backbone on a for-profit basis would attract
investment and could be conducted with relative efficiency. However
given the dominant position of the backbone, a for-profit
could conceivably get entangled in complex antitrust, regulatory,
political struggles. A nonprofit organization is not immune
such risks, but to the extent its users are represented in policy
making, tensions are more likely to get expressed and
internally
The status of backbone or regional networks within the Internet
entirely separate from the question of whether network services
metered and charged on a usage basis. Confusion in this regard
Kahin [Page 9]
RFC 1192 Commercialization of the Internet November 1990
from the fact that the low-speed public data networks (SprintNet
TymNet), which are sometimes seen as competitive to
services, do bill on a connect-time basis. However, these
services use X.25 connection-based packet-switching -- rather
the connectionless (datagram) TCP/IP packet-switching used on
Internet. Internet services could conceivably be billed on per
packet basis, but the accounting overhead would be high and
do not contain information about individual users. At bottom,
is a marketing issue, and there is no evidence of any market
metered services -- except possibly among very small users.
private suppliers, Alternet and PSI, both sell "pipes" not packets
Privatization by
As an alternative approach to encouraging privatization, Dr.
suggested barring mature services such as electronic mail from
subsidized network. In particular, NSF could bar the mail and
protocols, SMTP and NNTP, from the backbone and thereby
private providers to offer a national mail backbone connecting
regional networks. Implementation would not be trivial, but it
arguably help move the academic and research community toward
improved functionality of X.400 standards. It would also
traffic over the backbone by about 30% -- although given
growth in traffic, this would only buy two months of time
If mail were moved off the regional networks as well as off
NSFNET backbone, this would relieve the more critical
problem within certain regions. But logistically, it would be
complicated since it would require diverting mail at perhaps
thousand institutional nodes rather than at one or two dozen
nodes. Politically, it would be difficult because NSF
traditionally recognized the autonomy of the regional networks it
funded, and the networks have been free to adopt their own
guidelines. And it would hurt the regional networks financially
especially the marginal networks most in need of NSF subsidies
Economies of scale are critical at the regional level, and the
of mail would cause the networks to lose present and
members
The National Research and Education
The initiative for a National Research and Education Network (NREN
raises a broader set of policy issues because of the potentially
larger set of users and diverse expectations concerning the scope
purpose of the NREN. The decision to restyle what was
described as a National Research Network to include education was
important political and strategic step. However, this move to
broader purpose and constituency has made it all the more
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RFC 1192 Commercialization of the Internet November 1990
to limit the community of potential users -- and, by extension,
market for commercial services. At the regional, and especially
state level, public networking initiatives may already
economic development, education at all levels, medical and
health services, and public libraries
The high bandwidth envisioned for the NREN suggests a
distance between resource-intensive high-end uses and wide use
low-bandwidth services at low fixed prices. The different
placed on network resources by different kinds of services
likely lead to more sophisticated pricing structures,
usage-based pricing for production-quality high-bandwidth services
The need to relate such prices to costs incurred will in
facilitate comparison and interconnection with services provided
commercial vendors. This will happen first within and
metropolitan areas where diverse user needs, such
videoconferencing and medical imaging, combine to support
development of such services
As shown in Figures 1. and 2., the broadening of scope corresponds
a similar generalization of structure. The path begins
mission-specific research activity organized within a
computer. It ends with the development of a national
international infrastructure: a ubiquitous, orderly
system that reflects and addresses all social needs and
demand, without being subject to artificial limitations on purpose
connection. There is naturally tension between retaining
benefits of specialization and exclusivity and seeking the
of resource-sharing and economies of scale and scope. But
development and growth of distributed computing and
technologies encourage fundamental structures to multiply and
as components of a generalized, heterogeneous infrastructure.
the vision driving the NREN is the aggregation and maturing of
seamless market for specialized information and computing
in a common, negotiable environment. These resources have
which are far greater than the NREN. But the NREN can minimize
costs of access and spread the costs of creation across the
universe of users
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RFC 1192 Commercialization of the Internet November 1990
Figure 1. Generalization of Purpose
Discipline-Specific Research CSNET, HEPnet,
General Research early NSFNET, "NRN
Research and Education BITNET, present NSFNET
early "NREN
Quasi-Public many regional networks
"NREN
National Infrastructure "commercialized NREN
_______________________________________________________________
Figure 2. Generalization of Structure
Computer time-sharing
Network early
Internetwork ESNET, NSFNET (tiered
Multiple Internetworks present
Infrastructure "NREN
Workshop
Rick Adams,
Eric Aupperle,
Stanley Besen, RAND
Lewis Branscomb, Harvard
Yale Braunstein, University of California,
Charles Brownstein, National Science
Deborah Estrin, University of Southern
David Farber, University of
Darleen Fisher, National Science
Thomas Fletcher, Harvard
Kenneth Flamm, Brookings
Lisa Heinz, U.S. Congress Office of Technology
Fred Howlett, AT&
Brian Kahin, Harvard
Robert Kahn, Corporation for National Research
Kenneth King,
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RFC 1192 Commercialization of the Internet November 1990
Kenneth Klingenstein, University of
Joel Maloff,
Bruce McConnell, Office of Management and
Jerry Mechling, Harvard
James Michalko, Research Libraries
Elizabeth Miller, U.S. Congress Office of Technology
Eli Noam, New York State Public Service
Eric Nussbaum,
Peter O'Neil, Digital Equipment
Robert Powers,
Charla Rath, National Telecommunications and
Administration, Department of
Ira Richer, Defense Advanced Research Projects
William Schrader, Performance Systems
Howard Webber, Digital Equipment
Allan Weis,
Stephen Wolff, National Science
Security
Security issues are not discussed in this memo
Author's
Brian
Director, Information Infrastructure
Science, Technology & Public
John F. Kennedy School of
Harvard
Phone: 617-495-8903
EMail: kahin@hulaw.harvard.
Kahin [Page 13]
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