The Evolving Internet Traffic, Engineering, and Roles

1. The Evolving Internet Traffic, Engineering, and Roles - A Study of Performance and Economic Models - Joseph D Houle, K. K. Ramakrishnan, Rita Sadhvani, Murat Yuksel, Shiv Kalyanaraman September, 2007

2. Internet Industry’s Challenge… • Provide cost-effective Internet access while: • Applications continue to diversify relative to demands on the network • The number of users continues to grow at an annual rate of 12.5%. • The average traffic per user is expected to grow even faster at 25% per year.

3. Independent press Broadcast TV Broadcast Radio Publications New York Times Time, Fortune Cable TV Internet Portals AOL Satellite Radio XMRadio 100% Advertising Driven 100% Consumer Paid Completely ad-driven Revenue model where the consumer pays only for consumption device. Advertising is a critical component and helps subsidize the subscription costs to the consumer. Advertising is important component; Premium ad-free channels, e.g. HBO. Subscription revenues driven business model. Advertising revenue an insignificant component. Approaches to Consider • Build Differentiated Networks • Investigate Alternative Business Models Diff= gD Premium D D BE=(1-g)D Best Effort

4. Network Model Descriptions Best Effort model – Differentiated model – Best Effort N D Diff= gD Premium (no partitioning of resources) Scheduling (e.g. priority) D D BE=(1-g)D Best Effort

5. Single Link Analysis for Required Extra Capacity (REC) • Analyze the Required Extra Capacity (REC) of a single link with differentiation vs. best effort using standard Poisson (M/M/1) and MMPP models: • Required additional capacity to maintain the same loss performance for premium traffic. • Required additional capacity to maintain the same delay performance for premium traffic. 60% Utilization, 20% Premium ~1k packet queueing delay 80% REC 60% Utilization, 20% Premium ~1k packet queueing delay 160% REC Link Delay a=0.5, r=4 (slightly more bursty than M/M/1) a=0.5, r=8 (even more bursty)

6. Network Delay Analysis for Two Topologies • Build network models (based on Rocketfuel ISP Backbone topologies) out of the link model • Use the more conservative MMPP assumptions of a=0.5, r=4 • Averages the queueing delays and utilizations 60% Utilization 40% Premium 4 ms Ave Queueing Delay 60% REC 60% Utilization 40% Premium 4 ms Ave Queueing Delay 70% REC Network Delay Abovenet Topology Sprintlink Topology

7. Network Loss Analysis for Two Topologies Same Rocketfuel topologies as Delay Same MMPP burstiness assumptions (a=0.5, r=4) with a buffer size of 60 packets 60% Utilization, 40% Premium 0.4% loss prob. 60% REC 60% Utilization, 40% Premium 0.4% loss prob. 70% REC Network Loss Abovenet Topology Sprintlink Topology

8. Engineering Summary • Network Engineering Summary • Required Extra Capacity is useful to look at… In all situations the (REC) is significant for typical operational scenarios, more than 50% extra capacity. • With continued growth in traffic and varity of applications, differentiation will continue to be important • Results are sensitive to assumptions; most assumptions in this analysis are conservative. • Different topologies produce the same shape curve and similar values. • Even with small amount of video traffic, we still need lots of extra capacity. • Internet Business Model Evolution • Advertising Revenue - examples in content delivery markets • Multi-sided Markets - overview • Flows: • Revenue • Traffic

9. The Continuum Advertisement Driven Consumer Paid Independent press Broadcast TV Broadcast Radio Publications New York Times Time, Fortune Cable TV Internet Portals AOL Satellite Radio • Advertising is minor, not insignificant, component of revenue model. • Premium channels such as HBO, that are ad-free demand an additional fee. • Advertising is very small component of revenue model. • Subscription revenues drive the entire business model, making it quite often, unsustainable business model. • Advertising driven Revenue model. • Consumer pays minimally for content delivery, they need to buy the radio or TV. • Advertising is the major component of revenue model. • Advertising subsidizes the subscription costs.

10. Business Model Flexibility is Critical Advertising Driven Consumer Paid • AOL is moving away from a subscription based model to an advertising model. • NYT is diversifying its revenue by growing its online edition which will be primarily advertisement funded. • A blended mix of cost assignment between end user and content owner would serve the end user’s needs. Some proposed legislation would force the service provider to participate only in the rightmost side of the continuum. The Internet needs the ability to support different business models depending on the application or user to optimize the consumer value and continue investment in broadband infrastructure.

11. Multi-Sided Markets - Overview • A multi-sided market has a mediation platform that enables two or more groups of customers who value the other's participation on the same platform in order to generate/receive value. Content Provider Content Consumer - The Internet - A Multi-sided-Market Mediation Platform For Content Delivery • Price structure of multi-sided markets tends to evolve to be proportional to the business value received.

12. Yesterday’s Internet Content Provider Content Consumer • Revenue Flows • Consumers buy Internet access from their service provider • Content providers buy Internet access from their service provider • But no revenue flow between ISP… interconnection agreements were set up as simple settlement-free peering • Traffic Flows (A quick look under the Internet covers) • Routing practice between ISPs is “hot potato”, i.e. hand-off as quickly as possible. • Sending ISP provides short-haul transport over its network to nearest peering point with receiving ISP • Receiving ISP provides long-haul transport to final destination • With relatively symmetrical traffic, transport burden on both ISPs are similar Content Consumer’s ISP Content Provider’s ISP X B’s ISP B A’s ISP A

13. New Role of Today’s Internet Revenue Flows • Consumers buy Internet access from their service provider • Content providers buy Internet access from their service providers • Consumers buy content from their content providers (maybe subsidized by advertising revenue) • Content Providers use the Internet as the delivery vehicle for their product • Traffic Flows • Now that content provider’s ISP is sending a lot more traffic than it is receiving, any Content Consumer’s ISP that it peers with will carry lion’s share of transport burden. Content Provider Content Consumer Content Consumer’s ISP Content Provider’s ISP Content Provider’s ISP Content Provider Consumer's ISP Content Consumer

14. The Evolved Internet Based on Market Forces • A differentiated network that has evolved to meet the performance requirements and business model of the Content Providers. • Advertising revenue given an opportunity to play a role. • Multi-sided market economics given an opportunity to better align cost with benefit to the various parties. • A market-driven Inter-ISP settlement model. • Taken together these could provide a winning solution all around: • Applications can get the performance from the network they require • More value for consumers Content Consumer Content Provider Evolved Internet

15. Thank You For Your Time and Interest “… if and when consumers switch their consumption of entertainment media from broadcast and broadcast cable technologies to IP-based delivery, we would expect that paid content - or advertiser supported content - will have to take up a larger share of the burden of maintaining the core of the Internet”. Dr. Shawn O’Donnell, “An economic map of the Internet,” Proceedings of TPRC, September 2002