PA-Comnet Meeting June 26, 2002

The meeting began at 7:40AM at the Terman library. Bob Moss noted that he had an orientation meeting with Frank Benest 2 years ago and amazed him with the information that Paix carried 60% of all Internet traffic worldwide, but now was down to about 40%.

Robin Landers noted that PAIX carries a significant fraction of international Internet traffic even now, but she doesn’t have a real estimate of how much. She gave a brief background and history of PAIX. DEC began research on Internet connectivity in 1991. PAIX was started in 1996 and went from initial start to pilot operation in 6 months with $4.5 million of internal funding. When Compaq bought DEC, they decided it wasn’t an area that they wanted to be actively working. PAIX was sold to Abovenet/MFN for $75 million in 1998. They had additional resources to expand the operation. The business has expanded nationally to 6 sites. The PAIX model inspired a number of similar businesses all over the world. None of the other sites are like PAIX, because as the first such site there was some learning, and the cost and complexity was greater than for newer sites, and people have experimented with different business models. There now is a multi-billion dollar worldwide industry derived from the PAIX model.

PAIX was the result of a long term research team effort and a fast market implementation. In 1991, DEC labs built a corporate Internet gateway and housed the Uunet-Alternet exchange in a DEC-owned building downtown. In 1995 The Network Systems Lab created a business vision and business plan. In 1996 NSL got funding from DEC and used existing DEC staff, building, fiber, plus a few new hires and the existing Internet connections to build the pilot. By 1997, PAIX was one of the largest exchange points on the globe. And in 1998, it was sold for $75 million.

IX Neutrality = Coopetition, Competition and cooperation at each layer and across each layer of the network hierarchy. Infrastructure is shared at PAIX by the various competitors. Users both cooperate and compete at each layer of the network hierarchy, saving money by being able to swap and provide services to each other quickly and at low cost.

PAIX made money by providing physical access to the Internet, access to rack space, stable Internet backbone sites – giving easy access to the Internet Service Providers routers and other network suppliers equipment - and making it easy for ISP’s and their network providers to interconnect, opening telecom and fiber access for competition. PAIX also charges rent for the fiber that gives router-to-router access. Participants make money by buying and selling services to each other. Peering – exchanging traffic across ISP networks - is done both publicly over the switch and privately router-to-router. ISPs save money by being able to dynamically change switching and services rapidly as needed inside the facility easing service transfers. It is very simple to change connections at PAIX, to change who each user works with and with whom they buy and sell services. Now peering can also be done between facilities.

PAIX was created as a going business directly from R&D, which is unusual. They used lots of internal DEC staff for research and PAIX setup, and DEC funding was provided to set up the site. When it was sold to Abovenet/MFN it had to be turned into a profitable business. PAIX was revenue viable and fully operational, but it was not set up as a stand-alone business. Having Robin Landers for marketing was a major benefit in providing viability for PAIX.

Major accomplishments of PAIX include ISP diversity, providing a stable regional and international Internet backbone site, encouraging telecom competition, and providing competition for use of backbone fiber. It also inspired a number of similar sites to be established worldwide to try to emulate PAIX’s performance and technical success.

There are real opportunities for Palo Alto and the city to benefit from PAIX and the city fiber ring. The existence of PAIX and the fiber ring make it easy for multiple ISPs to provide high speed Internet access to all of Palo Alto. Since the Telcos at PAIX operate as central offices, they could possibly extend phone service over the fiber ring without having a separate telecom exchange. Instead of using PAIX, Palo Alto could emulate PAIX by finding locations for the routers and Internet connections, housing the service providers and letting them provide services over the fiber ring to residents, letting them make money by providing Internet access, or by providing other services or content. Palo Alto could be the one provider of the shared fiber infrastructure to multiple competing providers of data, video, and phone services to residential end users, businesses, and others on the fiber ring.

The limits on ISPs would be physical conflicts or maybe financial problems. Many ISPs can use the fiber ring to deliver whatever services people want to pay for. Users would select the ISP they want to use to access the Internet, and could change ISPs easily if the system is set up properly. PAIX provided only a facility, a central switch and space for router racks, but didn’t manage what business they conducted. The ISPs, Telcos and fiber providers did the actual distribution from PAIX to the Internet or other places. Palo Alto Utilities is talking about managing the system and actual delivery of services, but not the service itself, which would be done by various ISPs and other providers. The goal is to provide the physical presence and access to fiber, but not to actually deliver services. The fiber ring could provide high-speed Internet (possible video or phone) access to carriers using PAIX, and could bring multiple high speed services directly to fiber-connected homes.

One lesson from the history and operation of PAIX is that both highly capitalized early entrants and low capitalized providers had problems when the market crashed. Capital needs were high. ISP volume had to be high to pay for the capital investment plus operating expenses. Will a city system just be another means of providing service to existing telecoms or will it be the primary supplier? If it’s just another path for telecoms, they have the market power and revenues will be low. If the city is the prime path, and particularly if the city creates the fiber to the home connection, then revenues and profits will be greater. Most similar Internet access sites worldwide are government funded and may or may not make profit. As a long term vision a city system can open up the last mile from homes to the Internet to true competition and better service over a shared fiber utility that provides video, data and phone service.

Meeting adjourned at 8:40 AM

Submitted by BobMoss