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Network Working Working Group                           B. Kahin, EditorRequest for Comments: 1192                                       Harvard                                                           November 1990                   Commercialization of the Internet                            Summary ReportStatus of this Memo   This memo is based on a workshop held by the Science, Technology and   Public Policy Program of the John F. Kennedy School of Government,   Harvard University, March 1-3, 1990.   This memo provides information for the Internet community.  It does   not specify any standard.  Distribution of this memo is unlimited.Introduction   "The networks of Stages 2 and 3 will be implemented and operated so   that they can become commercialized; industry will then be able to   supplant the government in supplying these network services."  --   Federal Research Internet Coordinating Committee, Program Plan for   the National Research and Education Network, May 23, 1989, pp. 4-5.   "The NREN should be the prototype of a new national information   infrastructure which could be available to every home, office and   factory.  Wherever information is used, from manufacturing to high-   definition home video entertainment, and most particularly in   education, the country will benefit from deployment of this   technology....  The corresponding ease of inter-computer   communication will then provide the benefits associated with the NREN   to the entire nation, improving the productivity of all information-   handling activities.  To achieve this end, the deployment of the   Stage 3 NREN will include a specific, structured process resulting in   transition of the network from a government operation a commercial   service."  -- Office of Science and Technology Policy, The Federal   High Performance Computing Program, September 8, 1989, pp. 32, 35.   "The National Science Foundation shall, in cooperation with the   Department of Defense, the Department of Energy, the Department of   Commerce, the National Aeronautics and Space Administration, and   other appropriate agencies, provide for the establishment of a   national multi-gigabit-per-second research and education computer   network by 1996, to be known as the National Research and Education   Network, which shall:        (1) link government, industry, and the educationKahin                                                           [Page 1]RFC 1192           Commercialization of the Internet       November 1990        community;             ....             (6) be established in a manner which fosters and        maintains competition and private sector investment in high        speed data networking within the telecommunications        industry;             ....             (8) be phased out when commercial networks can meet the        networking needs of American researchers."   -- S. 1067, 101st Congress, 2nd Session, as marked up April 3, 1990   ["High-Performance Computing Act of 1990"], Title II, Section 201.Background   This report is based on a workshop held at the John F. Kennedy School   of Government, Harvard University March 1-3, 1990, by the Harvard   Science, Technology and Public Policy Program.  Sponsored by the   National Science Foundation and the U.S.  Congress Office of   Technology Assessment, the workshop was designed to explore the   issues involved in the commercialization of the Internet, including   the envisioned National Research and Education Network (NREN).   Rather than recapitulate the discussion at the workshop, this report   attempts to synthesize the issues for the benefit of those not   present at the workshop.  It is intended for readers familiar with   the general landscape of the Internet, the NSFNET, and proposals and   plans for the NREN.   At the workshop, Stephen Wolff, Director of the NSF Division of   Networking and Communications Research and Infrastructure,   distinguished "commercialization" and "privatization" on the basis of   his experience developing policy for the NSFNET.  He defined   commercialization as permitting commercial users and providers to   access and use Internet facilities and services and privatization as   the elimination of the federal role in providing or subsidizing   network services.  In principle, privatization could be achieved by   shifting the federal subsidy from network providers to users, thus   spurring private sector investment in network services.  Creation of   a market for private vendors would in turn defuse concerns about   acceptable use and commercialization.Commercialization and Privatization   Commercialization.  In the past, many companies were connected to the   old ARPANET when it was entirely underwritten by the federal   government.  Now, corporate R&D facilities are already connected to,   and are sometimes voting members of, mid-level networks.  There are   mail connections from the Internet to commercial services such asKahin                                                           [Page 2]RFC 1192           Commercialization of the Internet       November 1990   MCIMAIL, SprintMail, and Compuserve.  DASnet provides a commercial   mail gateway to and from the Internet and commercial mail services.   UUNET, a nonprofit corporation, markets TCP/IP services (Alternet)   with access to the Internet as well as mail services.  Performance   Systems International (PSI), a startup company which now operates   NYSERNET (the New York State regional network, partially funded by   NSF) is aggressively marketing Internet-connected TCP/IP services on   the East and West Coasts.  RLG is selling access to its RLIN database   over the Internet directly to end users.  Other fee-based services   include Clarinet, a private news filtering service, and FAST, a non-   profit parts brokering service.  However, in all these cases, any use   of the NSFNET backbone must, in principle, support the "purpose of   the NSFNET."   Under the draft acceptable use policy in effect from 1988 to mid-   1990, use of the NSFNET backbone had to support the purpose of   "scientific research and other scholarly activities."  The interim   policy promulgated in June 1990 is the same, except that the purpose   of the NSFNET is now "to support research and education in and among   academic institutions in the U.S. by access to unique resources and   the opportunity for collaborative work."  Despite this limitation,   use of the NSFNET backbone has been growing at 15-20% per month or   more, and there are regular requests for access by commercial   services.  Even though such services may, directly or indirectly,   support the purposes of the NSFNET, they raise prospects of   overburdening network resources and unfair competition with private   providers of network services (notably the public X.25 packet-   switched networks, such as SprintNet and Tymnet).   Privatization.  In some respects, the Internet is already   substantially privatized.  The physical circuits are owned by the   private sector, and the logical networks are usually managed and   operated by the private sector.  The nonprofit regional networks of   the NSFNET increasingly contract out routine operations, including   network information centers, while retaining control of policy and   planning functions.  This helps develop expertise, resources, and   competition in the private sector and so facilitates the development   of similar commercial services.   In the case of NSFNET, the annual federal investment covers only a   minor part of the backbone and the regional networks.  Although the   NSFNET backbone is operated as a cooperative agreement between NSF   and Merit, the Michigan higher education network, NSF contributes   less than $3 million of approximately $10 million in annual costs.   The State of Michigan Strategic Fund contributes $1 million and the   balance is covered by contributed services from the subcontractors to   Merit, IBM and MCI.Kahin                                                           [Page 3]RFC 1192           Commercialization of the Internet       November 1990   At the regional level, NSF provides approximately 40% of the   operating costs of the mid-level networks it funds -- with the   remainder covered by membership and connection fees, funding from   state governments, and in-kind contributions.  This calculation does   not include a number of authorized networks (e.g., PREPnet, and,   until recently, NEARnet and CERFnet) that receive no NSF funding.   However, NSF also funds institutional connections to the NSFNET,   which includes payments by the institution to the regional network.   Other agencies (DOD, NASA, and DOE) have also funded some connections   to NSFNET networks for the benefit of their respective research   communities -- and have occasionally funded the networks directly.   Finally, the campus-level networks at academic institutions probably   represent a perhaps 7-10 times larger annual investment than the   mid-level networks and the backbone together, yet there is no federal   funding program at this level.  Furthermore, since these local   networks must ordinarily be built by the institution rather than   leased, there is an additional capitalization cost incurred by the   institutions, which, annualized and aggregated, is perhaps another   20-50 times the annual costs of the mid-level and backbone networks.   (These figures are the roughest of estimates, intended only for   illustration.)The NSFNET Backbone as a Free Good   Whereas the NSF funding of mid-level networks varies greatly -- from   0% to 75% -- the backbone is available as a free good to the NSF-   funded mid-level networks.  It is also used free of charge by other   authorized networks, including networks not considered part of   NSFNET: CSNET, BITNET, UUNET, and PSI, as well as the research   networks of other federal agencies.  As noted, their use of the   backbone is in principle limited to the support of academic research   and education.   Through their use of the NSFNET backbone, these networks appear to be   enjoying a subsidy from NSF -- and from IBM, MCI, and the State of   Michigan.  BITNET and some agency networks even use the backbone for   their internal traffic.  Nonetheless, these other networks generally   add value to NSFNET for NSFNET users and regional networks insofar as   all networks benefit from access to each other's users and resources.   However, small or startup networks generally bring in fewer network-   based resources, so one side may benefit more than the other.  To the   extent that the mail traffic is predominantly mailing lists (or other   information resources) originating on one network, questions of   imbalance and implicit subsidy arise.  For example, because of the   mailing lists available without charge on the Internet, three times   as much traffic runs over the mail gateway from the Internet toKahin                                                           [Page 4]RFC 1192           Commercialization of the Internet       November 1990   MCIMAIL as from MCIMAIL to the Internet.  This pattern is reinforced   by the sender-pays fee structure of MCIMAIL, which discourages   mailing list distribution from within MCIMAIL.   The impact of such imbalances is not clear.  For now, the capacity of   the NSFNET backbone is staying ahead of demand: It jumped from 56   Kbps to 1.544 Mbps (T-1) in 1988 and will go to 45 Mbps over the next   year.  But NSF is concerned about a possible recurrence of the   congestion which drove users off the NSFNET prior to the 1988   upgrade.  Given the tripling of campus-level connections over the   past year, continued growth in users at each site, the parade of new   resources available over the network, and, especially, the   development of high-bandwidth uses, there is reason to fear that   demand may again overwhelm capacity.

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