Margit Vanberg, Short history of the Internet in:

Margit Vanberg

Competition and Cooperation Among Internet Service Providers, page 34 - 37

A Network Economic Analysis

1. Edition 2009, ISBN print: 978-3-8329-4163-5, ISBN online: 978-3-8452-1290-6

Series: Freiburger Studien zur Netzökonomie, vol. 14

Bibliographic information
34 3 Historical and technical background of the Internet The Internet was not invented to be what it is today. For the evolution from early computer communication within small communities to today’s “network of networks” it took over two decades. This chapter retraces this development. Section 3.1 gives a brief overview of the history of the Internet. In this section the most essential aspects of Internet development are identified. These aspects are then taken up in turn in the following subsections. Section 3.2 offers a more detailed description of the history of computer communications. Section 3.3 explains the origins of the Internet hierarchy. Section 3.4 describes the TCP/IP protocol, and section 3.5 recapitulates the history of commercial interconnection agreements. Section 3.6 concludes the chapter. 3.1 Short history of the Internet The Internet evolved out of a project on computer-to-computer communication, which was started in 1966 at the U.S. Department of Defense’s Advanced Research Projects Agency (ARPA). From this project resulted the first computer network using packet-switching technology, the ARPANET, which facilitated resourcesharing of (ARPA-funded) supercomputers located in academic and industrial research laboratories around the U.S.16 The success of the ARPANET led ARPA to extend the packet-switching concept to networks designed for the U.S. military, a terrestrial radio network (PRNET), and a satellite packet network (SATNET) (Kahn, 1995: 1). In order to interlink the various ARPA-supported networks, ARPA began pursuing research into a communications protocol, which could interconnect multiple networks with differences in underlying hardware. In the early 1970s this research resulted in the development of the TCP/IP protocol, the protocol standard still used in the Internet today. With the advent of affordable mini-computers in the 1970s, computer-networking was increasingly used not only to facilitate resource-sharing for computational purposes but also as a means of fast and efficient communication and informationsharing across larger distances. The communication possibilities made possible by computer-networking interested not only computer scientists with access to the AR- PANET but academics of all disciplines as well as industrial users. In the 1970s and 1980s several regional research networks and government networks were built based on the ARPANET model (Jennings et al., 1986). With time this was facilitated by 16 Packet-switching is explained in section 3.4.1. 35 the advent of commercial gateways and routers as well as mainframes and workstations equipped with TCP/IP software (Kahn, 1995: 2). In the academic arena, the U.S. National Science Foundation (NSF) supported the development of many such regional networks. In 1986 the NSF became even more involved by funding the NSFNET, a long-distance network connecting five sites at which NSF-funded supercomputers could be accessed. The NSF connected the supercomputer sites by a network of high-capacity links spanning the entire U.S. (Rogers, 1998).17 This network was open to interconnection by previously existing regional networks in support of research and communication (Jennings et al., 1986). The networks attached to the NSFNET had access to the NSF supercomputers and, more importantly, could use the long-haul data transportation network of the NSF to send data between their networks. By connecting to the common NSFNET, the regional networks, together with the NSFNET as a common backbone, formed the first “network of networks.” In the late 1980s regional and local university networks began offering Internet access services to industrial users as a means of refinancing their costs. At first, these commercial services offered only a limited connectivity, because the Acceptable Use Policy (AUP) of the NSF allowed only traffic in support of research and education on the NSFNET backbone. To circumvent the NSFNET backbone, commercial operators established private interconnections for commercial Internet backbone services at so-called Commercial Internet Exchanges (CIX).18 In the early 1990s, the NSF had to take a decision on further financing of the NSFNET project.19 With the establishment of commercial operators of computer networks and private interconnection points, the need for a publicly funded network was no longer as compelling as five years earlier. Commercial operators were putting pressure on the government to privatize the NSFNET (Kesan and Shah, 2001: 113).20 In May 1993 the NSF therefore decided that most of the NSF services were to be relinquished to 17 Rogers argues that an additional incentive for the NSF to fund the supercomputer centers program may have been her wish to maintain the United State’s competitive position in the areas of microelectronics and computing by stimulating the demand for supercomputers (Rogers, 1998: 6). Rogers also gives a detailed account of the events leading up to the NSF overtaking the leadership in computer networking in the mid 1980s. 18 Internet Exchange Points (IXPs) are shared interconnection points, where carriers meet for the purpose of exchanging Internet traffic. 19 See Frazer (1996). 20 In 1988, the NSF had contracted the “Management and Operation of the NSFNET Backbone Network” to a consortium around Merit Inc., which had previously been operating a regional university network. The consortium was completed by IBM and MCI, who contributed supercomputer technology know-how and experience in the installation and operation of data circuits respectively. The private operators complained about the fact that in 1990 Merit had subcontracted the operation of the NSFNET to the newly founded Advanced Network Services (ANS) corporation. This ANS corporation had then divided the NSFNET into two operations: the NSFNET and the ANSNET. ANS used the ANSNET to offer backbone capacity to commercial users, thereby avoiding the AUP of the NSF. Since the ANSNET used the same physical lines as the NSFNET, ANS, in fact, used publicly funded network infrastructure to offer backhaul services to commercial users. 36 private operators. Most notably, the NSF decided to cease federal funding of national backbone facilities.21 The NFSNET was officially terminated in April 1995. From this time onwards, the role of the NSFNET backbone was taken over by private operators of networks with a wide geographic scope, which began offering Internet backbone services to regional and local networks. The year 1995 can be considered the birth date of the commercial Internet we use today. Figure 3.1: Number of hosts connected to the Internet (1994 to 2007) The growth of the Internet since this time is depicted in Figure 3.1, which shows the number of hosts connected to the Internet according to a survey by the Internet Software Consortium. In January 1995 the number of hosts connected to the Internet was estimated to count about 4.8 million. By January 2007 this number was estimated to have reached 433 million. The figure also shows that growth rates continue to be high even after two decades of Internet technology dissemination, the reason being that Internet dispersion in developing countries is still in its beginnings. 21 In its solicitation for services still qualifying for federal funding, the NSF explicitly stated that “No solicitation is presented here for national service providers as it is anticipated that costs of operation of the national service providers will be recovered from users of the services that they provide” (NSF, 1993: 2). 37 The short history of the Internet sketched in this section raises several questions regarding the Internet development, questions that are worthwhile to explore more profoundly in order to understand the characteristics of the Internet that shall play a role in the competition policy analysis presented in this thesis: • How did Internet connectivity, the fact that many thousands of independent networks can be reached via one home network, evolve? This question will be taken up in section 3.2 which looks at the development of computer communication and the development of connectivity in more detail. • How did the present hierarchy between ISPs evolve? This aspect of Internet history is looked into in section 3.3. • Where did the common standards for Internet communication come from, and who is responsible for the further advancement of Internet standards? This question is considered in section 3.4, which takes a closer look at the development of the TCP/IP protocol suite and Internet standardization. • Lastly, how did the terms for Internet interconnection evolve? This question is taken up in section 3.5 which deals with Internet interconnection agreements. 3.2 History of computer communication and Internet transport services The foundations for computer networking and ultimately for the Internet were laid by the advent of computers and subsequent research into communication between computers for purposes of remote login and time-sharing. Section 3.2.1 gives a more detailed background on the motives for computer communication. Section 3.2.2 then traces the development of computer networking to the Internet by discussing how connectivity developed from limited interconnectivity in early computer networks to the universal connectivity of the Internet. 3.2.1 Computer networking The first computers were invented in the 1930s and 1940s. Despite their modest processing power, these large machines filled whole rooms and were very expensive. It was therefore common, that they were shared by numerous users, when they first became available for academic applications. In the 1950s, this resource-sharing meant that a user would hand in a program for calculation to an attendant and receive the results after hours or days, depending on how many people were sharing the computer, and on how complex the calculations were that were run. If a program had a “bug” in it, an error or flaw in either the source code or the software design, then it could take many iterations of this very time-consuming process to get good results. The limitations of this type of batch-processing motivated research into enabling closer human-computer interaction, an effort that resulted in so-called time-sharing

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Die Konvergenz der Netztechnologien, die dem Internet, der Telekommunikation und dem Kabelfernsehen zu Grunde liegen, wird die Regulierung dieser Märkte grundlegend verändern. In den sogenannten Next Generation Networks werden auch Sprache und Fernsehinhalte über die IP-Technologie des Internets transportiert. Mit den Methoden der angewandten Mikroökonomie untersucht die vorliegende Arbeit, ob eine ex-ante sektorspezifische Regulierung auf den Märkten für Internetdienste wettbewerbsökonomisch begründet ist. Im Mittelpunkt der Analyse stehen die Größen- und Verbundvorteile, die beim Aufbau von Netzinfrastrukturen entstehen, sowie die Netzexternalitäten, die im Internet eine bedeutende Rolle spielen. Die Autorin kommt zu dem Ergebnis, dass in den Kernmärkten der Internet Service Provider keine monopolistischen Engpassbereiche vorliegen, welche eine sektor-spezifische Regulierung notwendig machen würden. Der funktionsfähige Wettbewerb zwischen den ISP setzt jedoch regulierten, diskriminierungsfreien Zugang zu den verbleibenden monopolistischen Engpassbereichen im vorgelagerten Markt für lokale Netzinfrastruktur voraus. Die Untersuchung zeigt den notwendigen Regulierungsumfang in der Internet-Peripherie auf und vergleicht diesen mit der aktuellen Regulierungspraxis auf den Telekommunikationsmärkten in den Vereinigten Staaten und in Europa. Sie richtet sich sowohl an die Praxis (Netzbetreiber, Regulierer und Kartellämter) als auch an die Wissenschaft.