Oxygen and FLAG

Ron Resnick (resnick@actcom.co.il)
Fri, 18 Jul 1997 15:35:19 +0300 (EET DST)

Rohit wrote:
> I was reading about an audacious new 275,000 km undersea fiber internet
> effort at http://www.oxygen.org/ which pointed to a paper by Raj Reddy at:
> http://www.rr.cs.cmu.edu/ndg/gndg-ftth.html

And then wrote:
> Following up on Project Oxygen, I read up on WIRED's profile of its
> predecessor. Neal did an EXCELLENT job on this very lengthy piece from
> issue 4.12.
> Rohit
> >From a WIRED article by Neal Stephenson on FLAG (Fiber Link Around the
> Globe):
> http://wwww.wired.com/wired/4.12/features/ffglass.html

(a) Thanks for the original pointer to O2.
(b) I stumbled on
the Wired piece while looking at O2 as well. In fact, I was just
composing a FoRK post about it, and O2 itself.
The Wired article is magnificent - apparently it's 62 pages in
the original print version, and the longest thing Wired had published
(at least till that point - last fall.) I can't say I read it all, but I did
get through most of it - highly recommended. Some snippets I liked

First, some comment on O2. How legit does this thing look? I mean,
anybody can set up a web site, register a domain like oxygen.org, and
post whatever blather they like. Sure, they *talk* about a $14 billion
investment and that "A number of multinational companies based in the
United States, Europe and Japan have provided initial capitalization
to launch Project Oxygen." But when was the last time you saw a $14
billion project with a press release done in 20 point font, with a broken
cgi counter on the front panel, and anonymous 'multinationals'. Any evidence,
beyond this web page, that this is for real? How about checking the business
registration of CTR Group Ltd. in New Jersey? Was the press release carried
in any business press, like WSJ? How did you find this page, Rohit?

Still, it's interesting stuff. Whether O2 is real or not, the business
opportunity is there and someone at some point will start to capitalize
on it.

Snippets from the Wired piece I liked included:

>As of this writing, I have learned that nearly the entire state of
>Minnesota was recently cut off from the Internet for 13 hours
>because it had only one primary connection to the global Net, and that
>link went down. If Minnesota, of all places, is so vulnerable, one can
>imagine how tenuous many international links must be.

Can this possibly be true? I know almost nothing about how to look
at network maps and such, but I really find it hard to believe that
an entire US state has only one primary connection these days.

>The least important of them has a laptop
>and a cell phone, but most have more advanced stuff like portable printers,
>GPS units, and that ultimate personal communications device, the satellite
>telephone, which works anywhere on the planet, even in the middle of the
>ocean, by beaming the call straight up to a satellite.
>Sample conversation at Papa Doc's:
>Envious hacker tourist: "How much does one of those satellite phones cost,
>Leathery, veteran cable layer: "Who gives a shit?"

Rohit, I think you need to get one of these :-)

>To a hacker tourist, the scene is strikingly familiar: it is the ancient
>hacker-versus-suit drama, enacted for the millionth time but sticking to
>its traditional structure as strictly as a Noh play or, for that matter,
>a Dilbert cartoon. Cable layers, like hackers, scorn credentials, etiquette,
>and nice clothes. Anyone who can do the work is part of the club. Nothing
>else matters. Suits are a bizarre intrusion from an irrational world. They
>have undeniable authority, but heaven only knows how they acquired it. This
>year, the suits are from Hong Kong, which means they are probably smarter
>than the average suit. Pretty soon the suits will be from Beijing, but
>Beijing doesn't know how to lay cable either, so if they ever want to get
>bits in or out of their country, they will have to reach an understanding
>with these guys.

Everyone wears a uniform. Even if it's taped up pink slippers :-)

> Kessler Marketing Intelligence Corp. (KMI) is a Newport, Rhode Island,
> company that has developed a specialty in tracking the worldwide submarine
> cable system. This is not a trivial job, since there are at least 320
> cable systems in operation around the world, with old ones being retired
> and new ones being laid all the time. KMI makes money from this by selling
> a document titled "Worldwide Summary of Fiberoptic Submarine Systems" that
> will set you back about US$4,500 but that is a must-read for anyone
> wanting to operate in that business. Compiling and maintaining this
> document gives a rare Olympian perspective on the world communications
> system.
> In the late 1980s, as KMI looked at the cables then in existence and the
> systems that were slated for the next few years, they noticed an almost
> monstrous imbalance.
> The United States would, by the late 1990s, be massively connected to
> Europe by some 200,000 circuits across the Atlantic, and just as massively
> connected to Asia by a roughly equal number of circuits across the
> Pacific. But between Europe and Asia there would be fewer than 20,000
> circuits.
> Cables have always been financed and built by telecoms, which until very
> recently have always been government-backed monopolies. In the business,
> these are variously referred to as PTTs (Post, Telephone, and Telegraphs)
> or PTAs (Post and Telecom Authorities) or simply as "the clubs." The
> dominant club has long been AT&T - especially in the years since World War
> II, when most of the international telecommunications system was built.
> Traditionally, the way a cable system gets built is that AT&T meets with
> other PTTs along the proposed route to negotiate terms (although in the
> opinion of some informed people who don't work for AT&T, "dictate" comes
> closer to the truth than "negotiate"). The capital needed to construct the
> cable system is ponied up by the various PTTs along its route, which,
> consequently, end up collectively owning the cable and all of its
> capacity. This is a tidy enough arrangement as those telecoms
> traditionally "own" all of the customers within their borders and can
> charge them whatever it takes to pay for all of those cables. Cables built
> this way are now called "club cables."
> Given America's postwar dominance of the world economy and AT&T's
> dominance of the communications system, it becomes much easier to
> understand the huge bandwidth imbalance that the analysts at KMI noticed.
> Actually, it would be surprising if this imbalance didn't exist. If the
> cable industry worked on anything like a free-market basis, this howling
> chasm in bandwidth between Europe and Asia would be an obvious opportunity
> for entrepreneurs. Since the system was, in fact, controlled by government
> monopolies, and since the biggest of those monopolies had no particular
> interest in building a cable that entirely bypassed its territory, nothing
> was likely to happen.
> But then something did happen. KMI, whose entire business is founded on
> knowing and understanding the market, was ideally positioned, not just to
> be aware of this situation, but also to crunch the numbers and figure out
> whether it constituted a workable business opportunity. In 1989, it
> published a study on worldwide undersea fiber-optic systems that included
> some such calculations. Based on reasonable assumptions about the cost of
> the system, its working lifetime, and the present cost of communications
> on similar systems, KMI reckoned that if a state-of-the-art cable were
> laid from the United Kingdom to the Middle East it would pay back its
> investors in two to five years. Setting aside for a moment the fact that

!! [Ron]: and note that the 1989 study preceded, and could not possibly
have anticipated, the bandwidth demand that the Internet and Web have created
since. The business case can only have gotten far better since 89,
hence presumably things like $14 billion dollar 02 projects. The
payback for something like O2 is presumably also a manageable sort
of 2-5 year thing, for it to get off the ground.

> it went against all the traditions of the industry, there was no reason in
> principle why a privately financed cable could not be constructed to fill
> this demand. Investors would pool the capital, just as they would for any
> other kind of business venture. They would buy the cable, pay to have it
> installed, sell the capacity to local customers, and make money for their
> shareholders.


> In the old days, this would have prevented FLAG from ever coming into
> existence. But these are the new days, telecom deregulation is creeping
> slowly across the planet, and many PTTs now have to worry about
> competition. So the results of the FLAG sales pitch varied from country to
> country. In some places, like Singapore, FLAG never made an agreement with
> anyone and had to bypass the country entirely. In other places, the PTT
> broke ranks with AT&T and agreed to land FLAG. In others, the PTT turned
> it down but an upstart competitor decided to land FLAG instead, and in
> still others, the PTT declined at first, and then got so worried about the
> upstart competitor that it changed its mind and decided to land FLAG after
> all.
> It would be very easy for you, dear reader, to underestimate what a sea
> change this all represents for the clubs. They are not accustomed to
> having to worry about competition - it doesn't come naturally to them. The
> typical high-ranking telecom executive is more of a government bureaucrat
> than a businessperson, and the entire scenario laid out above is
> irregular, messy, and disturbing to someone like that. A telecrat's reflex
> is to assume, smugly, that new carriers simply don't matter, because no
> matter how much financing and business acumen they may have, no matter how
> great the demand for their services may be, and no matter how crappy the
> existing service is, the old PTT still controls the cable, which is the
> only way to get bits out of the country. But in the FLAG era, if the
> customers go to another carrier, that carrier will find a way to get the
> needed capacity somehow - at which point it is too late for the PTT.
> The local carriers, therefore, need to stop thinking globally and start
> thinking locally. That is, they need to leave long-range cable laying to
> the entrepreneurs, to assume that the bandwidth will always somehow be
> there, and to concentrate on upgrading the quality of their customer
> service - in particular, the so-called last mile, the local loop that ties
> customers into the Net.

This is the thing that bugs me. Sure, landing cables on beaches is
cool Hemmingway tough-guy stuff, and certainly the land based fiber
loops are coming as well, but this still only gives us fiber to the curb.
Where does the massive investment needed for fiber to the home come from?
Where is the funding for things like Raj Reddy's GNDG/FTTH proposal?
Raj seems to state that it comes from competition between traditional
telco/cables and new competitors:

>2.Telecom service provider's role: ATT, MCI, Sprint and several others
>already have the necessary rights-of-way and dark fiber in the ground
>to provide GNDG. However, they are probably unwilling or unable to
>forego variable prices and high cost ($600/month for a T1 line) based on
>old tariff structures unless competitive pressures push them in
>that direction. To be brutal, in a deregulated environment, only the
>nimble will survive.
>3.Information technology providers' role: Assuming that a gigabit to
>home will exist very soon, there are still no systems that exploit
>such data rates today. At best, they can handle 100 Mbps Ethernet. It is
>imperative that within a year or two, PCs come with Internet enabled
>interfaces, capable of accepting gigabit data rates. This requires
>higher bandwidth architectures and compatible operating systems and
>application software.
>4.Competition's role. Imagine that Microsoft, HP or IBM announces that
>they are setting up partnerships to create GNDG/FTTH. ATT, MCI, Sprint,
>Time Warner, TCI and the Baby Bells would soon have to announce competing
>HFC (Hybrid Fiber Coax) solutions. None of which would be able to offer OC3,
>OC12 and OC48 connections (that is, data rates over 155mb), unless they
>also replace their current analog wire by FTTH. In the latter case, they
>have no comparative advantage over any other provider of FTTH, leading
>to an interesting market situation where the ability to invest in huge
>capital infrastructures will determine the winners and losers.

The trouble I see with this is that MS, HP, IBM etc. have no business
infrastructure for wiring homes! Nor rights of way, nor nothin'.
They can 'announce' all they want. But are
they in any position to build FTTH? Meanwhile, without such external pressure,
the telcos themselves, as Raj notes, are not about to give up on their
lucrative (usurious?) T1 rates and rinky-dink ISDN.
Competition amongst themselves alone
hasn't (yet) caused FTTH to be seen as more than a pipe dream.
FTTH is technically possible (christ, if giga wiring the ocean is
possible, certainly giga wiring suburbia should be!) and the power-user
business model exists, as all FoRKers can undoubtedly attest. But,
we don't want to have to get FTTH from the telcos/cables. So, answer?
I have ideas, but I'd rather hear FoRK opinions first :-).

BTW, on Raj's point 3, I'm not sure we need gigabit capable endstations.
Personally, I'd rather have a houseful (or, in fact, a life-full) of
LANS populated with 100Mbit consuming devices, than a single mega-monster

One last swing back through Stephenson's Wired piece:

> The Internet poses another problem for telcos by being asymmetrical.
> Imagine you are running an international telecom company in Japan.
> Everything you've ever done, since TPC-1 came into Ninomiya in '64, has
> been predicated on circuits. Circuits are the basic unit you buy and sell
> - they are to you what cars are to a Cadillac dealership. A circuit, by
> definition, is symmetrical. It consists of an equal amount of bandwidth in
> each direction - since most phone conversations, on average, entail both
> parties talking about the same amount. A circuit between Japan and the
> United States is something that enables data to be sent from Japan to the
> US, and from the US to Japan, at the same rate - the same bandwidth. In
> order to get your hands on a circuit, you cut a deal with a company in the
> States. This deal is called a correspondent agreement.
> One day, you see an ad in a magazine for a newfangled thing called a
> modem. You hook one end up to a computer and the other end to a phone
> line, and it enables the computer to grab a circuit and exchange data with
> some other computer with a modem. So far, so good. As a cable-savvy type,
> you know that people have been hacking cables in this fashion since
> Kelvin. As long as the thing works on the basis of circuits, you don't
> care - any more than a car salesman would care if someone bought
> Cadillacs, tore out the seats, and used them to haul gravel.
> A few years later, you hear about some modem-related nonsense called
> the World Wide Web. And a year after that, everyone seems to be talking
> about it. About the same time, all of your traffic forecasts go down the
> toilet. Nothing's working the way it used to. Everything is screwed up.
> Why? Because the Web is asymmetrical. All of your Japanese Web
> customers are using it to access sites in the States, because that's where
> all the sites are located. When one of them clicks on a button on an
> American Web page, a request is sent over the cable to the US. The request
> is infinitesimal, just a few bytes. The site in the States promptly
> responds by trying to send back a high-resolution, 24-bit color image of
> Cindy Crawford, or an MPEG film of a space shuttle mission. Millions of
> bytes. Your pipe gets jammed solid with incoming packets.
> You're a businessperson. You want to make your customers happy. You
> want them to get their millions of bytes from the States in some
> reasonable amount of time. The only way to make this happen is to purchase
> more circuits on the cables linking Japan to the States. But if you do
> this, only half of each circuit is going to be used - the incoming half.
> The outgoing half will carry a miserable trickle of packets. Its bandwidth
> will be wasted. The correspondent agreement relationship, which has been
> the basis of the international telecom business ever since the first
> cables were laid, doesn't work anymore.
> This, in combination with the havoc increasingly being wrought by
> callback services, is weird, bad, hairy news for the telecom monopolies.
> Mercogliano believes that the solution lies in some sort of bandwidth
> arbitrage scheme, but talking about that to an old-time telecrat is like
> describing derivative investments to an old codger who keeps his money
> under his mattress. "The club system is breaking down," Mercogliano says.

'Bandwidth arbitrage scheme'. Gee, what a concept! Where pray tell
may I have heard of such a thing before?

Have fun! Block off a few hours to read Stephenson,

Ron Resnick IBM: ron_resnick@vnet.ibm.com
IBM Haifa Research Lab HRL world: resnick@interlog.com
MATAM 31905 Haifa, Israel http://www.interlog.com/~resnick/ron.html
Tel: 972-4-829-6491

"A shadow is the ..
... mobile, persistent, distributed, self-descriptive,
self-contained, pro-active, cooperative, trustworthy,
object-oriented, software analog of some real world object"
-- Sandor Spruit