The radical change of the internet in the last ten years
Among the overarching arguments and counter-arguments to the proposal for a fair contribution of large traffic generators to the costs they generate in telecommunications networks, one deserves special attention. It is often mentioned that this issue was raised more than ten years ago and did not receive the necessary support to move forward and since nothing has changed there is no point in raising it again ten years later. The claim that nothing has changed on the Internet in the last ten years is surprising.
The truth is that in the last ten years Everything has changed on the Internet: The network architecture of the Internet has changed, business models have changed, traffic volumes have grown exponentially, and the balance between the companies that make up the Internet ecosystem has shifted.
From the initial Internet, based on websites, with a multitude of companies and a balanced ecosystem between producers and consumers of content and the telecom operators that transport that content, an Internet dominated by a very small number of companies has consolidated over the last decade : the hyperscalers. Thanks to her business acumen and the “The winner gets everything” Trend in Internet business models, these companies have achieved a position of dominance in the Internet ecosystem that is undeniable and undeniable as early as 2022, creating a structural problem that needs a solution. This situation has prompted regions like the European Union to promote legislative action like the Digital Markets Act (DMA).
If this reality cannot be denied, all companies and authorities involved in the future and smooth functioning of the digital ecosystem should consider that it is time to review some of the rules and models that were used in the early Internet -era were agreed, and that no no longer fit into the reality of 2022. It is time to lay a more solid foundation for the new Internet era than for the current one, which can only be done on the basis of an understanding of Internet architecture and its evolution.
Initial Internet Architecture
The Internet is a network of networks, consisting of thousands of interconnected networks. The connection architecture of networks on the Internet was originally hierarchical. There were 3 tiers of networks: Tier 1 were global networks the connection of which ensures full access to any content or user anywhere in the world; Tier 2 compliant regional networkswhile Tier 3 were the local networks with which internet users and content and application providers (CAPs) were connected. Tier 1 is what is traditionally known as the Internet Backbone.
In the early days of the Internet, application and content providers and users associated with an operator that provided the Internet access service and was responsible for connecting to a higher-level operator to achieve the transition to the global Internet.
As can be seen, the connection between the various networks that make up the Internet was established using two different services. When a lower-level network connects to a higher-level network, it pays for the so-called transit service. This service allows a user of this network to reach any destination or access any content hosted on any network connected to the Internet. Networks on the same level could also connect directly using a so-called peering agreement. The direct connection of two networks avoids the use of transit services. This service provided direct access to the users and content of the two interconnected networks, but did not offer visibility to the users and content of other networks.
On a commercial level, the ‘downstream’ network in transit contracts paid the ‘upstream’ network for the service. In contrast, Peering Agreements are based on unregulated criteria on the number of users and content providers each network has and the traffic exchanged. Since the operators seeking interconnection tended to have similar network structures, the services – and the associated costs – were comparable to one another. The implicit assumption of network symmetry (especially symmetry in access networks) and costs led to free ones in many cases peek Agreements based on the assumption that payments to cover costs incurred in the counterparty’s network will be offset against payments received from that counterparty. The parameter of symmetry in the traffic exchange became a guiding criterion in the negotiation of traffic in this early Internet model peek Agreement.
The Flattening of Internet Architecture
The architecture of the Internet has had to adapt to the new demands resulting from the exponential growth of video traffic (or video stream). Several elements have been introduced over the years that have drastically changed internet architecture. On the one hand, video required capabilities that the basic Internet architecture could not provide. This led to the introduction of an element, CDNs (Content Delivery Networks), Clouds specialized in video distribution This reduced the need for increased capacity in higher-level networks (1 and 2) and reduced latency (the time it takes for content to reach the end user), improving the user experience. On the other hand, as the large hyperscalers grew and consolidated their platform model, they began building their own selective transport networks (at the most profitable tiers) and their own selective CDN infrastructure.
This change brought one complete transformation in the technical architecture of the Internet. However, the connection business model associated with the initial Internet architecture failed to evolve. None of the connection rules created for the original internet could be modified. Or rather, the hyperscalers, given the value they derive from this connection model, have not allowed those rules to change and are using their undisputed market dominance to impose rules and conditions.
With the introduction of these elements, the Internet has evolved over the past decade into a flatter network, where the original levels and hierarchies are disappearing. Those hyperscalers that have achieved market dominance and sufficient business size to do so connect directly to many operators’ networks at their lowest-cost tiers, bypassing the transit networks. but not as a user of the Internetas they did in the early stages, but as “operator” Use of peek Agreement. The creation of their own infrastructure has allowed the large hyperscalers to avoid not only the costs of Internet transit but also the costs of distributing their content, giving them a competitive advantage over other players who do not have a dominant position and therefore no free peering can enforce agreements.
The architecture of the Internet is highly centralized and dependent on a few players, the large hyperscalers.
Internet users, telecom operators or content providers?
The bulk of Internet transit traffic today is generated by large hyperscalers. In addition, the delivery of their content to end users bypasses the traditional internet hierarchy. Today, three of the top 5 internet transit connectivity providers are hyperscalers. These companies can reach most networks directly without having to traverse the Internet hierarchy.
Surely it’s time to ask if The internet giants are connectivity providers under the supervision of national regulatory authorities and subject to their decisions, or they are Application and content providers or internet users, obliged to pay for the connectivity service received. What role should they play in the Internet connection model?
The advantage that the costs of using the operators’ networks are not paid
As traffic from large hyperscalers increased and these companies aggregated most of the internet traffic, they created their own private network to avoid transit fees. They downgraded their connection to local operators on traditional terms and connected to other networks through forced activation peek.
These companies became a “category” not initially envisioned in the Internet connection model: they ceased to be Internet users and became so “special” network operators neither with an access network nor with a national network, but with content that gave them a clear dominant position in the negotiations peek Agreement.
It’s important to understand that when a hyperscaler negotiates a peek Agreement with a telecom operator, it does not do so according to the same principles on which peek Agreements between operators are negotiated. Providing essential content and applications (driven by consumer demand) gives them bargaining power that is usually free peek Agreement. They are demanding the benefit of not having to pay for their traffic to use the transport service provided by operators.
This does not appear to be a sign of balanced bargaining power between operators and large hyperscalers. Rather, it shows the distortion of a market that, if it does not adapt to the evolution of the Internet, can only lead to an unsustainable situation, dominated by a few companies that define the rules and conditions and make it, for the most part of the value generated in the digital ecosystem.
Mixing the reality of networks with the reality of large hyperscalers in the interconnection market has created a distorted market. The current definition of the Internet interconnection market is no longer relevant as it reflects the reality of the new interconnection model based on the CDN and Cloud Infrastructure of the hyperscalers.
Since this situation was never foreseen in the original Internet model, we should consider whether this is the right basis for funding the investment efforts of telecom operators to build national backbones and access networks.
The essential debate on how to build a fairer and more sustainable digital ecosystem
The debate about the fair contribution of big internet companies is the debate about the need to review assumptions agreed upon in the 1990s and still applied 30 years later to an internet that bears little resemblance to the internet that existed in the 1990s USA was born 1990s.
It’s legitimate that the companies that have benefited the most from these rules want to keep them in the Web 3.0 era, but there is a broad global consensus that these rules need to be revised in order to create a fairer and more balanced Internet -Ensure the ecosystem. Legitimate counter-arguments to telecom operators’ claims should be based on facts and figures from today’s Internet, not from an Internet that no longer exists.