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Margit Vanberg, Packet-switching research in:

Margit Vanberg

Competition and Cooperation Among Internet Service Providers, page 45 - 46

A Network Economic Analysis

1. Edition 2009, ISBN print: 978-3-8329-4163-5, ISBN online: 978-3-8452-1290-6 https://doi.org/10.5771/9783845212906

Series: Freiburger Studien zur Netzökonomie, vol. 14

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45 to belong to this group of Tier-1 operators.31 The network coverage of the various interconnection agreements entered into by ISPs is explained in more detail in section 3.5, which shall also consider the implications of the interconnection contracts an ISP has for its hierarchical position in the Internet. 3.4 Design and development of the TCP/IP Protocol One important prerequisite for the development of the Internet was the programming of standards for computer communication and later for communication between different networks. This section reviews the basic principles of the Internet standards. Section 3.4.1 introduces packet-switching in general, and section 3.4.2 the TCP/IP protocol in particular. The subsequent sections 3.4.3 and 3.4.4 cover important aspects of TCP/IP communication in more detail, in particular the addressing system in IP networks, and the forwarding of data packages. Section 3.4.5 highlights newer developments in Internet logistics. Section 3.4.6 concludes by providing an outlook on ongoing Internet standardization processes. 3.4.1 Packet-switching research Traditional telephone networks use a so-called connection-oriented, or circuitswitched technology in order to link two terminal devices. With this technology, a dedicated line between caller A and receiver B is set up for the entire duration of a call. This end-to-end link is pieced together by switching through several point-topoint segments between network nodes (i.e. switches) along the way. The capacity of the link is guaranteed to this communication. In the 1960s researchers at the RAND Corporation, a think tank in California working mainly on U.S. Air Force projects, and at the National Physical Laboratory (NPL) in the UK were working on an alternative to circuit-switched communication. The motivation at RAND was to develop a secure communications system which would withstand losses of large portions of the underlying communications infrastructure, as could, for instance, be the result of a military attack.32 A circuitswitched network bears many risks in this regard because one lost central segment 31 In a recent publication the following firms were counted among the Tier-1 ISPs: MCI, AT&T, Sprint, Level3, Qwest, Cogent, Global Crossing, and Cable & Wireless (Dierichs and Pohlmann, 2005: 126). Naturally, due to mergers, acquisitions, and spin-offs, the names of the firms at the top of the Internet hierarchy have changed over time and are always subject to further change. 32 The case of nuclear war was also considered as a scenario in which large portions of the U.S. communications infrastructure could be lost. From this research at RAND the rumor got started, that the Internet was a military project with the goal of building a network resistant to nuclear attack (Baran, 1964). 46 or node in the network can make communication between many sites impossible. Research at NPL was motivated by a search for a communications protocol that would allow remote machines and other terminal devices (such as printers) to communicate with a time-sharing computer via the public telephone system (Naughton, 2000: 123). Circuit-switching is uneconomical for computer communication, because the traffic generated by computers is “bursty,” by which is meant that the data stream tends to be very irregular, with a lot of data transmitted in a short time interval, followed by a long pause before more data is transmitted. A dedicated line would be wasted for much of the communication. The new communications technologies developed independently at RAND and at NPL were both based on the concept of packet-switching. With packet-switching, the data stream to be transmitted is decomposed into smaller segments, called “pakkets” or “datagrams,” which can be sent on a variety of different possible routes between A and B, before being reassembled in the correct order at their destination. Packet-switching uses capacity only when data is transmitted. Therefore, packetswitching allows a more cost-efficient use of the underlying resources. The network can handle more than one communication per link at a time by placing packets in the pauses of packets originating from unrelated data transmission. A packet-switched network therefore requires fewer communication lines. A further advantage of pakket-switching is that since every packet can potentially travel a different route, a defect or lost cable segment or node does not disrupt the transmission. Packetswitching therefore also guarantees a better performance. 3.4.2 The TCP/IP protocol ARPA reverted to this research on packet-switching for building the initial ARPA- NET and the packet-switched terrestrial radio network and satellite network operated by ARPA (Naughton, 2000: 132ff.).33 In the 1970s, Robert Kahn at ARPA pursued the idea of establishing an open network architecture, which would enable communications between the diverse ARPA networks that were using packetswitching technology. His vision was to make possible the inter-working of these independent networks by a “Meta-level Internetworking Architecture” that would allow the connected but otherwise independent networks to maintain differing internal communication designs (Leiner et al., 2003: 4). In 1973, Kahn, together with Vinton Cerf, then a computer scientist at Stanford University, began work on a standard for communications across networks using packet-switching technologies (Kahn, 1995: 3). Their research resulted in the Transmission Control Proto- 33 The specific protocols for the applications run on the ARPANET were essentially written by graduate research students of the computer science departments hosting the initial ARPANET nodes. These graduate students started the Network Working Group and communicated their ideas by writing “Requests for Comments” (RFCs). The RFCs remain to this day the way standards related to the Internet are discussed and disseminated.

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Zusammenfassung

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.