Regulatory policies in relation to metrics and data ...

Regulatory policies in relation to metrics and data collection for measuring the emergent Internet Hanne Kristine Hallingby and Gjermund Hartviksen Telenor Research and Future Studies Next Generation Network Technologies Snarøyveien 30, N-1331 Fornebu, Norway {hanne-k.hallingby, gjermund.hartviksen} @telenor.com Dr. Silvia Elaluf-Calderwood and Dr. Carsten Sørensen The London School of Economics and Political Science Department of Management The Information Systems & Innovation Group New Academic Building, 5th Floor Houghton Street, London WC2A 2AE, United Kingdom {s.m.elaluf-calderwood, c.sorensen} @lse.ac.uk

Abstract The Internet is currently undergoing a major process of change and transformation. It is moving away from a basic model of layered architecture to a modular architecture with integrated provisioning of digital services and products to users (Garud, Kumaraswamy et al. 2003; Clark 2004; Fransman, 2010 and Yoo 2010). Furthermore traffic volumes and asymmetry of traffic information available for analysis makes it difficult to gain a full overview of and understand these changes (Hallingby et al, 2012 and Liebenau et al, 2012). Hence studying Internet as a whole is difficult, and there are many issues with data collection, with the academic and commercial literature providing plenty of references to such problems. The analysis is made even more complicated when trying to address medium and long-term sustainability of the telecom and Internet industries (Yoo, 2012). Value creation and capturing is a growing challenge to Internet ecosystem stakeholders, seeking to re-innovate a sustainable system. Hence the emergent Internet also changes the actions of national and regional regulators. Regulators are normative acting on behalf of consumers and ensuring adequate investments in society critical infrastructure (FCC, 2011). Their goals are to provide mediation using competition laws and rules as the recent French case Cogent vs. France Telecom shows (ARCEP, 2012b). This is particularly due to fast convergence of Internet and telecom. The transforming state of Internet has led many regulators around the world to make efforts to collect data for such regulatory purposes but with variable degree of success. Thus measuring Internet remains a huge challenge, and we will suggest some ways forward in this paper. Norway is a relatively small country “in the world of the emergent Internet” (Hallingby and Erdal, 2011). However the size and other aspects of the Nordic culture (e.g. openness to accountability, sense of community at all levels of society, etc.) have created an environment in which the national regulator (NPT) has multiple sources of data (NPT, 2012b), and also with correlated Internet data that are collected by diverse institutions. This has resulted in a clear and well explained ability to describe the Norwegian Internet (Hallingby and Erdal, 2011). There is also a culture of regulatory pro-active engagement with changes to the earliest emerging of issues e.g. CDNs legal forms (NPT, 2012a).

This article discusses possible type of metrics required to explain the link between Internet network measures and Internet economic variables. First of all we are describing the emerging Internet in Norway, also indicating a more generic change supporting the modularity observed elsewhere. Second, and more important for the purpose of this article, we believe the metrics displayed are very valuable to companies, users, regulators and any other stakeholders. Specifically, we show the case of Norway as an example of the type of knowledge that may be developed, how these mappings can be performed, the scope and limitations of such methodology, and how it can be used by regulatory authorities to monitor but not obstruct the development of business activities. Finally, we also review the usefulness of this type of measurement in the context of a recent regulatory analysis of CDNs in Norway. Keywords: Internet metrics, Internet regulation, asymmetric data, Internet sustainability, telecoms

1. Introduction The Internet and telecom worlds are converging rapidly and heading for a clash between the business practices and culture of the telecom and the IP world. The changes observed in Internet traffic demand (e.g. volume and type of traffic) provide the ground for the development of a conceptual and practical emerging Internet. The traditional business models of the Internet are stressed, induced by the traffic growth that has an effect on the Internet through firms’ changed strategies and investment considerations. On the other hand, European regulatory authorities continue to use the understanding of the traditional Internet as a horizontal layered architecture model with well-defined principles as a framework for the regulations they put on the actors in the emerging Internet. Policy makers pursue important principles for fair competition through their regulatory authorities, while continuing to promote increased industry investments in broadband and Internet infrastructure which are not sustainable. In this article we discuss how experiences from the Norwegian Internet ecosystem (Hallingby et al. 2012) case can inform the discussion on what policymakers would need to know about the emerging Internet, and the metrics that would be required – in order to cater for predictable market conditions that meet regulatory goals and ensure innovation and investments. 1.1 Data type and volume, network topology The turning point in demand-hungry services has been driven by the use of IP services creating a web of products and services (e.g. video streaming) that are mainly digital (Brown, 2010). While telecommunication operators had focussed on delivering physically based products (broadband and voice), digital Internet companies certainly take advantage of the current physical telecom network, and are able to provide innovative services including sustainable business models. The Internet data growth is immense, for example mobile Internet grew by 70% in 2012 (Cisco, 2012). The hybrid emerging from the convergence of the telecom and the Internet world is what we call Internet digital infrastructures. Telecom operators are confronted with heavy competition from the so-called OTT (over the top) players, which are in almost all the cases global players (e.g. Google, Apple, Microsoft, etc.) for the distribution of content. These OTTs have developed architectures and peer relationships that gives them significant advantage in the exploitation of economies of scale in the provision of digital services (Labovitz, LekelJohnson et al. 2009; Shakkottai, Fomenkov et al. 2009). Internet companies or OTTs compete directly with telecom operators in areas of revenue by using similar service bundle products, without the heavy investments in infrastructure. This situation raises issues about how companies providing the physical infrastructure of the network will be able to establish pricing structures that will allow them to increase their revenue, attract investors, update and maintain the network while sharing some of the revenue created by the providers of new Internet services (e.g. You Tube, Akamai, etc). At the same time the so called shadow carriers emerge (Cherry, 2011), carriers that are operating and highly influencing market conditions but not within the scope or current regulatory frameworks. The convergence of the Internet world and the telecom world require a revision of some of the assumptions made in relation to the provision of Internet services. Before going into further detail on how to study all these different layers of complexity, we need to discuss further challenging issues in the current evolving Internet.  

It is widely recognized that while the physical Internet architecture is still horizontal and layered (Labovitz, Lekel-Johnson et al. 2010), the service architecture of the Internet is shifting towards a different structure that is a combination of taking advantage of the physical features of the network, to deliver digital services using logical modularity. Although the horizontal model has not been abandoned, the trend is a move towards integral clusters shaping structures that form an additional vertically layered architecture. This challenges the deterministic approach of both commercial Internet actors and regulatory authorities; peering agreements, value networks, net neutrality, pricing structure, etc. (Yoo 2012) These changes have had a huge impact on local telecom networks investments in maintenance and development, in the pricing and billing structure, as well as the ability of the incumbents to provide competitive solutions for the global and local Internet markets against competition from emerging new stakeholders, for instance Internet Companies or OTTs. These challenges have to be met by policymakers who need to ensure innovation and investments for society critical infrastructures. The suggestion to increase the telecom operators’ share of the OTTs revenue may not be enough – and there are many indicators this will be the case – to cover the huge investment costs required in upgrading the telecoms networks in the next few years. Others have suggested that national or local governments worldwide eventually will have to pay a significant share of upgrades. This question about the management of the next generation and fibre networks will for certain need to revise the competition principles and perhaps look to national ownership and management of networks, similar to those currently under implementation in Australia and New Zealand, which are observed with great interest by regulators all over the world (Australian Government, 2011 and Beltran, 2012). 1.2 Investment and regulation considerations Different regulatory regimes are in place to mediate with this Internet-Telecom convergence in USA, EU and worldwide. Within Europe, the wise umbrella of regulatory regimes has concerted efforts under a new organization named BEREC. NPT, the Norwegian telecommunications regulator is associated to the EU body but keeps its independence from the regulatory framework (NPT, 2011). In the debate for economic proposals that allow the development of a coherent development of a sustainable telecom industry, the debate for broadband and Next Generation networks is at the core of the discussions (Frederiksen, 2011 and Dini et al. 2012). Ways to finance and manage the revenues that hopefully will arise from such upgrades are constantly suggested and debated in the media, government, academia and business literature (Fijnvandraat and Bouwman 2007, and Czernich et al. 2011).   For some players in the European telecom industry the role of regulators is not clear. Some regard regulation as an inhibitor instead of a promoter of the required network investments. By keeping a close control on the maximum prices of wholesale data, the bargaining power of the incumbents is unbalanced in what they call an asymmetric relationship between the regulators and the industry, which protects the OTTs to detriment of the operators. Others blame the industry for their current problems due to lack of innovation (Chappell, 2012) and for relying too much on business models that were fast eroded by new technologies: e.g. SMS gradually being replaced by data instant messaging services such as Whatsapp, or Facebook messaging, VoIP replacing traditional voice services, IPTV replacing analogue TV and cable broadcasting, etc (Brown 2010; Howard, Rumley et al. 2011 and Bali 2012). Whether the challenge lies by the regulators or the industry they share a need for a better understanding of the emerging Internet and thus relevant metrics. In the end any value proposition that is sustainable for the future of telecoms has to include the symbiotic relationship between emergent bandwidth hungry digital services vs. traffic increase, and thus the networks’ requirements for upgrade and maintenance of the current and future physical infrastructure (Friederiszick, Kałużny et al. 2011). In the past the idea of

evolving business models was based on pricing and billing. This type of transactional based operation is one in–which telecoms operators historically excelled. The billing metrics were based on distance, time length usage and time of the day. A reform in the structure of prices for the emerging Internet will require the establishment of new metrics of comparison at international level that allows pricing and billing for type of usage and speed of delivery of data. When it comes to regulations the discussion on the value system and the clustering of services and products in the digital infrastructure is overshadowed by the discussions on net neutrality (Stabell and Fjeldstad, 1998; Schuett, 2010 and Ryan and Gerson, 2012). In simple terms there are two issues to be discussed at a deeper level: a) to maintain the intention of fair competition and b) in the context of fair competition – and not only net neutrality – the future of Internet quality of service (QoS) versus best effort as a contribution to the investments needed. Competition is not being discussed in the debate for net neutrality; this is in part due to the generalised approach that the telecom market is a two levelled market (ATKearney 2010) and to asymmetries in regulation that favour certain stakeholders over others (Soria, De la Cruz et al. 2012). The issue of value capture and the assumption that only net neutrality can ensure a good quality of service to consumers is based on the USA telecom model where there is a legacy of one monopoly player (AT&T) that dominates the delivery of services (Wu, 2010). In Europe competition for the consumer is more effective and there is no doubt that the actions taken towards the development of a competitive market in the last 15 years have provided good pricing and services delivered to consumers (Brunekreeft and Meyer, 2011 and Steen, 2011). Thus the urge for more differentiated services might be more present in the European context. To continue the intention of good pricing and services through a competitive market the actual market forces have to be monitored and understood. It is our view that policymakers need to know about the emerging Internet, and the metrics that would be required in order to cater for predictable market conditions that meet regulatory goals and ensure innovation and investments. The cases of France and Norway reported in section two informs our research question in several ways. First, we draw on the experiences made in the Cogent vs. France telecom case in France. Secondly, we describe decisions from the Norwegian regulatory authorities which exemplify how challenges from the emerging Internet are still met within a regulatory framework founded on an understanding of a traditional layered Internet. In section three we give detailed insight into the metrics collected for our analysis of the Norwegian Internet. The case study becomes an example of what kind of data and sources it is possible to collect and use to monitor and regulate competition better. Additionally, the case study of the Norwegian Internet is an example of what the Internet has changed into: it is local and clustered, and not only global and flat with equal peers. Our analysis establishes the existence of actors and strategic actions taken by actors as responses to new market conditions. In section four we learn from case study results, regulatory decisions and actions and data collections and analysis and suggest directions for future regulatory frameworks and possible ways to monitor the market. The final section five is the concluding remarks.

2. The problems of measuring and regulating the emergent Internet 2.1 ARCEP, Cogent and France Telecom Regulators are addressing the issue of measuring the Internet using different strategies. There are global, EU and US perspectives. CAIDA is one of the organizations that has been measuring the Internet for a long time. It has raised serious concerns about the estimation of

the traffics volumes and actual shape of the Internet (Claffy, 2008). The European demand for metrics from regulators is just starting to emerge as we can see from the case below. In 2005, Cogent, a US telecommunication operator, signed a data transit agreement with the French telecommunication company France Telecom, via its transit operator business Open Transit. According to this “peering agreement”, the exchange of data between networks, usually free, was subject to “peering fees” when the traffic between transit operators becomes asymmetric (ARCEP, 2012a). The contract stated that France Telecom would charge a fee to open new technical capacity if the incoming traffic on its network was 2.5 higher than its outgoing traffic. The purpose of such a policy was to protect France Telecom’s domestic network, Orange, from congestion. At this time, Mega Upload – which has since been shut down by U.S. authorities – was a customer of Cogent. The amount of video uploaded by subscribers of Orange caused a strong asymmetry in the traffic: up to 13 times greater in one direction than in the other. France Telecom asked Cogent to pay for the opening of additional capacity of interconnection. Cogent challenged this demand for violation of the antitrust laws claiming, among other things, that France Telecom was compromising the peering system. The Competition Authority held that France Telecom’s demand was not anti-competitive (ARCEP, 2012b). France Telecom did not refuse to give Cogent access to its network between 2005 and 2011 - France Telecom actually opened several times, for free, new capacity to meet Cogent’s demands, but it only asked Cogent to pay the opening of new capacities in accordance to its contractual policy regarding peering, without challenging the capacities already afforded for free. The court explained that such demand was not unusual in the Internet industry in case of traffic asymmetry. In this case, the demand was particularly legitimate because the traffic was highly asymmetric, and Cogent was aware of its contractor’s peering pricing policy. Even though France Telecom’s request was held legal, the Competition Authority pointed out the lack of transparency and formalized relationship between the domestic network of France Telecom Orange and its transit operator business Open Transit. It held that this situation made it difficult to control potential margin squeeze and discriminatory practices, which therefore eased the implementation of such illegal practices. France Telecom proposed to formalize and monitor the application of an internal protocol between Orange and Open Transit describing the technical, operational and financial rules applicable to the supply of interconnection services. Following some consultations and adjustments, the Antitrust Authority decided that these commitments were relevant, credible, and verifiable and made them mandatory. In the event of future litigation, they should enable the Authority to verify that France Telecom has not implemented discriminatory or margin squeeze practices against competitors. We forecast that the situation confronted by ARCEP will not be singular and unique, other European regulators will be in due course required to take actions in diverse sectors of the Internet architecture, system or economy. And they will require data that can help them do this talks with good advice.   2.2 The role of Internet regulators in Norway The Norwegian Post and Telecommunications Authority (NPT) monitors the Norwegian market in a traditional way and NPT has acted in behalf of the protection of consumers in diverse manners. Similar to ARCEP, and in their role of regulators, those actions are in many cases replies do consumers requests or arbitrage when rules of fair competition are affected. The most recent case is the situation emerging from the introduction of a new CDN, Netflix to the Norwegian market. In the US there has for some time now been a dispute between Comcast and Netflix about how to deal with the increased network traffic caused by entrants like Netflix and HBO, and who that should take this cost. In Norway we see the same picture, however in a more lenient way. An on-going discussion in the Norwegian press about

network quality after Netflix’ entry into the Norwegian market, illustrates very well the current combat between content aggregators/distributors and network operators (Eckblad, and Bakken, 2012; Bakken, 2012a and Bakken, 2012b). According to Netflix their entering into Norway in 2011 has been a success (Bakken, 2013). However this entry has put pressure on network bandwidth. Figures from the USA indicate almost 30% of the total downstream traffic from Netflix in peak hour in 2011 (Sandvine, 2011), a pressure that the network operators have responded to rather differently. Telenor the Norwegian incumbent – has been rewarded with a low score on Netflix’s ranking because of low throughput (Eckblad and Bakken, 2012). Telenor respond that they have no such indications neither from network monitoring nor from their users and believes Netflix’s ranking is a revenge after a dispute around who should be responsible for investing in necessary equipment to manage the traffic growth and the balance between uses of CDNs versus BGP traffic. The core question is who should pay for content delivery, sender or receiver network. Neither party will surrender because the precedence this might give (Bakken, 2012b). Other network operators in Norway have a more pragmatic approach to this and have chosen to open up for Netflix to place their CDN servers into the operators’ networks. Although they have the same basic understanding as Telenor, they choose to prioritise their customers’ experience, and adjust at least in the shorter term. These clashes raise the question as to whether this is a matter the Norwegian regulator NPT should consider or intervene in. The reason for NPT to work on market regulation is to secure good, reasonably priced and future-oriented electronic communications services through a sustainable competition. Another reason for intervention is due to net neutrality violation. Neither lack of competition nor net neutrality discrimination has so far trigged NPT to take any regulatory decision due to this on-going combat. Within the existing regime, the Norwegian regulator has concluded that there is no need to regulate CDNs according to net neutrality (NPT 2012a), principles that only adhere to the network layer of the Internet1. That is – CDNs are regarded as belonging to the content layer. Further they comment that: “… The conclusions NPT has reached subsequent to the meetings with actors in the field during autumn 2011 suggest that there is no need for electronic communications regulation in this market. The general feedback from providers and buyers of CDN services, and from ISPs, was that they did not see the need for special measures or regulations. NPT’s impression is that the competition in this market works and that the CDN providers offer their services to all interested customers on market terms. It must also be noted that the market and service range is considered to be at a developmental stage…The market is expected to undergo large transformations in the coming years….The market mechanisms appear to function with regard to agreements on the placement of CDN servers with various ISPs. However, NPT is aware that not all Norwegian ISPs allow servers from specific CDN providers in their networks, and there has been a discussion about whether CDN providers should pay the ISPs for the placement of the servers. The situation in Norway thus far seems to be that the ISPs do not receive payment, but this varies in the rest of Europe. The ISPs’ incentives for having CDN servers located in their network appear to be                                                                                                                                         1  The  Norwegian  guidelines  on  network  neutrality  only  relate  to  the  network  layer.  In  accordance  with   the  guidelines,  the  network  shall  transfer  the  data  traffic  in  an  open  and  non-­‐discriminatory  manner   regardless  of  the  identity  of  the  sender  or  recipient  of  content  or  services.  All  data  traffic  shall  be   treated  equally,  end  users  themselves  shall  decide  what  the  Internet  connection  is  used  for,  and  the   ISPs  shall  not  manipulate  the  data  traffic  from  competing  content  providers  (NPT,  2012a,  p  33).  

that they save on IP transit and improve the user experience of their own end-users.” (NPT 2012b, pp18). It is not our intention or the scope of this paper to do an in-depth debate on NPT’s conclusion on CDNs, but we will use it to illustrate some of our main points. First of all we simply think that their analysis illustrate the basic elements that the Internet market consists of; actors, providers, buyers, services, market terms and payment. There are providers and purchasers with different needs finding a way to interact at an acceptable compensation rate. Secondly, at this point of time the regulators still discuss net neutrality according to a layered understanding of the Internet, although they recognize the developmental stage that the Internet is undergoing.

3. The Norwegian case in detail 3.1 Data sources in a Norwegian context We provide a case study which tried to make sense of the changes in the Internet (Hallingby and Erdal, 2011). Intuitively it was first necessary to prove that there was a change and that there was a localised Norwegian Internet. At a later stage it has been possible to build a fully comprehensive map of the Norwegian Internet linking ASN membership to economic variables. This has been aided by the available data collected by multiple organizations defining the working functions of the Internet and corporate life in Norway (NPT, The Brønnøysund Register Centre, Proff Forvaltning, Norid, 3-4 national and international exchanges). Furthermore the analyses have been made possible through the use of a number of generic sources (e.g., Hurricane, RIPE, Robtex, web-sites, WebHosting) and a combination of qualitative and quantitative methods, all documented in Table 1. The convenient size of Norway’s population has made it manageable to manually collect and explore the relevant data from globally accessible sources. Thus these data are not unique to Norway, but more difficult to structure and sort in other countries. In addition there are publicly available data sources in Norway that ease the analyses of the single firm with regards to industry type, nationality, revenues, ownerships, and profits. Likewise the regulatory authorities publish detailed information about the firms they monitor, and Internet exchanges publish actors that peer with them. Norway is a mature Internet country with a modern economy and an affluent society. Enterprises will as a rule provide a website with rich presentations of their mission, products and even customers. The use of the national domain tail .no is dominant. All in all this cater for an opportunity to document a robust picture of the Norwegian Internet, which should serve as a guide to understand and monitor other markets. Many information sources have been used as input to the analysis of the Norwegian Internet. All enterprises in Norway are obliged to register and report to the government on variables such as yearly revenues and other key figures, ownership and employees. They also have to categorize their activity according to the EU NACE standards for industry sector statistics (Statistics Norway, 2008). This information is administered by The Brønnøysund Register Centre and made public available by the distributor Proff Forvaltning. This arrangement gives researchers a great opportunity to study the Norwegian industry, also the Internet industry. The list of companies can also serve as a starting point for a visit to their home sites. These company web sites are to a varying degree home sites expressed in languages other than Norwegian, thus it is a major advantage to know Norway and the Norwegian language when these sites are to be analysed. Another information source is the Norwegian Post and Telecommunication Authority (NPT). NPT, in addition to other missions, regularly takes the temperature of the Norwegian electronic communications services market and as a part of that also gives an overview of

Internet access providers (ISP). Some of these ISPs have their own AS number, but not all. These data can be cross checked with information from other public sources with a global scope like Robtex (www.robtex.com), RIPE (www.ripe.net) and other regional Internet registries. Important information from the latter sources are AS numbers, ownership and peering agreements. Source location

Description of role with regards to data

Type of data

Norwegian Post and Telecommunication regulator

Publish data on e-com actors in Norway, market shares

Enterprise name, revenues for different e-com services, market shares.

Proff.no/Proff forvaltning, the main distributor of these data on behalf of The Brønnøysund Register Centre (Norwegian entity for registering public data).

Publish data on Norwegian enterprises

Enterprise name, organization number, type according to NACE codes, nationality, region, revenues (annual historical data), profits (accounts),ownerships, sister companies, notes

Norwegian registry authority, Norid

Publish numbers of domains in use in Norway, and enterprises who can assign domain names or registrars

Number of .no domains

Norwegian Internet exchanges

Publish networks connected to the exchanges

Name attached to AS number, IPaddresses

RIPE Network Coordination center

Publish enterprises that are RIPE-members, with services in Norway

Name of enterprises. These may be different from name attached to AS number description.

Hurricane Electric Internet services

Publish national lists of AS numbers, and enable searches for more detailed information on public peering and transit, and domains at IP-addresses

AS number, name attached to it, which is not always direct connection to enterprise name. Domains that are hosted at different IP-addresses.

Robtex Swiss Army Knife Internet Tool

Enable searches for information on AS numbers and peers. Enable searches for hosting of domains within ASs.

AS number, name attached to AS number which is not always a direct connection to enterprise name). The AS that host a domain. This information proved to be reliable

Webhosting.info

Publish international domains registered by Norwegian enterprises (com, net, org, info, biz)

Number of international domains, by enterprise registering

Alexa.com: the web information company

Publish popularity ranking lists of websites, in countries

Name of popular domains

NORWEGIAN SOURCES

Name and number of registrars

GENERIC SOURCES

Table 1. Data sources for surveying the Norwegian Internet

The web site webHosting.info holds relevant information about international (com, net, org, info, biz) Internet domains and where these are hosted. Their statistics do not represent the country where the domain name is hosted, but rather the country of the domain name's “Web Hosting Company”. The statistics are only about the number of domains, not the amount of traffic they generate, how often they are visited etc. The web site alexa.com offers statistics of web sites and their popularity that produces a “popularity ranking” of domains. A specific Norwegian internal ranking is considered as official indication of coverage in the media industry, (TNS, Topplisten2). These are purely Norwegian sites; yet support the general impression of ranking from e.g. Alexa.com  

3.2 Results from the Norwegian case study Our study has had the autonomous system - AS - number as main research object. An AS is a connected group of one or more IP prefixes run by one or more network operators, which has a single and clearly defining routing policy – identified by the AS number (Hawkinson, 1996). We have identified 166 Norwegian ASs, belonging to 157 organizations. Only one third of these are what we call traditional Internet Access Providers (IAP), or often called Internet Service Providers (ISP). Another third is a mixed group with e.g. private wide area networks, content providers and private or public initiatives. The final third consists of enterprises that we categorize into the IT industry, anything from IT outsourcing to software as a service and other types of Internet applications. The Norwegian AS numbers are linked to the global Internet through a handful of important international actors (Tier 1s) such as Level 3 and TeliaSonera, and constitute a local Internet deeply embedded in the Norwegian digital economy. Our expectations of the number of IAPs holding AS numbers were somewhat lower than the identified one third of 166 Norwegian ASs. One reason is that the size of the population of Norway (around 5 million) should indicate a relatively lower number. Another reason for our expectations is that 80-100% of respectively the fixed and mobile broadband market in Norway is dominated by only 10-20 enterprises (NPT, 2012). In the same way, the number of ASs not being IAPs was also unexpectedly high. However, we did expect to find that some IT enterprises have started to route their own traffic. Holding one third of the total Norwegian ASs, the IT industry holds a significant share of the Norwegian Internet. Some of these IT enterprises provide access included in their IT offering, but many do not. These enterprises use autonomous system numbers to route their own traffic into the Internet, and make their services efficiently available for their end-users. Hence, these facts about the constitution of Internet enhance our understanding of the Internet not only as an access network but also as a distribution network for the IT industry. All in all this overview of the Norwegian market signals a much more diverse and complex Internet industry than is often reported. Within the Norwegian AS numbers, the 166 different ASs seem to prefer transit to – or peering with – a few ASs, making these ASs hubs in the Internet. The tendency to be hubs for other Internet actors was reinforced by the distribution of domains and enterprises in the IT industry not having their own AS numbers. In parallel there was a clear tendency for some IAPs to act only as access providers. They are to a small degree providing transit (in the sense of access to content providers), hosting neither small nor high-volume domains or connecting the IT industry. This latter group are so called Eyeball ISPs (Hall, Clayton et al, 2011).                                                                                                                                         2 th  TNS,  Official  listing  of  digital  media  coverage  in  Norway,  Last  visited  4  July  2013,     http://www.tnslistene.no/  

The hubs, which turned out to be originally both IAPs and IT enterprises, seemed to have large activity with regards to transit and hosting. Depending on whether or not they provide access, they fall into the categories denoted as Balanced or Hosting ISPs (Hall et al, 2011). The tendency to form hubs was further reinforced by the ownerships and alliances connecting the ASs. The Balanced ISPs were clearly positioned to host application and services within their AS routing domain, thus providing Internet access customers with intra AS routing to these services. The ASs we may call Hosting ISPs were those most hidden to our – and our community’s – general knowledge. Their critical position as hosts for many large society and business mission critical services, the active peering policies and source of Internet traffic has been revealed. Again they are Norwegian, and based on this we induce that being close to access subscribers and networks is necessary for this type of actor. This is reinforced by the fact that we find very few large Norwegian Websites and providers of services over the Internet that host their services with non-Norwegian actors, i.e. Amazon is not common as a host in the Norwegian market. Based on the analysis of the different Norwegian ASs it is possible to establish four arch types along two dimensions (see Table 2 below); 1) providing Internet access – or not, and 2) providing hosting of domains, websites etc. – or not. Three of these arch types are in accordance with the ISP types mentioned above; the Eyeball, Balanced and Hosting ISP. In addition we have identified one arch type that neither provides access nor hosts anything but its own content; the Content, Application and Service (CAS) provider. The four arch types were populated with about the same number of ASs.

End-user access

NO End-user access

Hosting domains/websites for 3rd party

NO Hosting

IAP and Hosting

Internet Access Provider (IAP)

(Balanced ISP)

(Eyeball ISP)

Hosting

Content, application, service

(Hosting ISP)

(CAS)

Table 2. Categorization of holders of AS numbers

A further look into the arch types reveals that they differ in many ways, e.g. customers, endusers, products and services, and revenue models. They have all different challenges in a changing and dynamic market, but share an interest in establishing revenue models that can carry the belonging costs. They also share the risk of ending up carrying an unfair share of the Internet costs: capacity, quality, connection and hosting. A higher growth in the large IT industry and the stagnating Telecommunication and Publishing market are important underlying forces leading to the dynamics in the market and between the arch types. Behind these dynamics is the increased demand for network capacity, especially due to the rise in video consumption. This is something described in available traffic data trends reports (Sandvine, 2011; Cisco 2012 and ITU, 211). One solution – forced on many traditional ISPs – has been to become significantly more cost efficient, but this is not a sustainable situation. In the archetypes and the dynamics between them we can read at least two strategies that may generalize into more basic shifts in the Internet. On one side we may see a shift to specialization (Lessing, 2001). The dynamics caused by risks with costs and revenue balance may drive autonomous system numbers into specializing on access and content respectively, i.e. the Eyeball and Hosting ISP (and possibly the CAS provider). This is actually a reinforcement of traditional Internet layer roles, and the implicit layer modules. On the other hand we may see increased vertical integration in the form of ASs handling the risk factors by internalizing the source of the challenge, across the layered Internet. This is

where we speak of the Internet becoming more modular in the form of vertical integration, through collapsing the independent layers of Internet. The case study of Norway reports firstly an increase in the number of actors, the diversity and the complexity of the Internet, followed by a clear indication of network hubs representing modules specialized within and across traditional layers. Additionally we observe a vital Norwegian Internet market, complementary to the global Internet that to such a degree dominate our perception of the Internet phenomenon. There are some limitations to the findings in our study. The ability to generalize is limited and the validity of the variables chosen – such as control and distribution of domains as an indication of strategy direct – will need to be further refined. In addition, the data are based on publicly available data and especially private peering agreements are hidden from us (Ager et al, 2012). However, we still think that the results may inform studies of the Internet in other countries and continents.

4. Analysis and recommendations The focus of this article is to discuss how experiences from the Norwegian case can guide the discussion on what policymakers would need to know about the emerging Internet, and the metrics that would be required – in order to cater for predictable market conditions that meets regulatory goals and ensure innovation and investments. The case study of Norway – in the contrast to what analyses in other countries cannot reveal – gives more detailed information on the actors active in the Internet. Their type of business, relationships, and alliances are indicatively the content of the business relationships. In order to regulate in any form, this is exactly the type of information needed to monitor and govern the market. 4.1 Learning from case study results Traditionally the Internet started out as a strict three-level hierarchy consisting of backbones, regional Internet service providers (ISPs), and last mile providers – the so-called tier 1-3 providers. The relationships between the layers were predictable, based in purchase of “access” to the Internet on a higher level through transit – se Figure 3 based on Yoo’s proposal to represent the Internet (Yoo 2012). In Norway we see that remains of this hierarchy still exist. At the same time, we observe that new types of actors adhering to different rules have emerged, and that actors previously being pure ISPs are moving into new roles. Over time, the networks comprising the Internet have begun to enter into a much more diverse set of business relationships, first with private peering agreements and multihoming, and later secondary peering, content delivery networks (CDNs), caching practices and server farms. This is all driven by a need to ensure quality, market reach and costs, right at the core of the market forces where all end-users, providers and competitors are stakeholders. This is illustrated in Figure 4 and 5. One clear characteristic of the new market conditions is how different actors take on holding IP-addresses, identified by an AS number, and thus becoming logical Internet “networks” themselves. It is this resource that enables them to be a part in new type of relationships. A much more diverse complex market has emerged, with actors having both crossing and shared motivations (Faratin et al, 2007). Complexity increases simply by the growth of number and types of relationships between all the actors, a complexity which further evolves when numbers of actors grow and the relationships are unstable and unpredictable. Again the case of Norway indicates both a high number of actors, with different motivations and varying relationships, as well as the more modularized market structure.

Figure 1. Network hierarchy -– Sourced from Yoo (2012)

Figure 2. Representing secondary peering - Sourced from Yoo (2012)

Figure 3. Content Delivery Network - Sourced from Yoo (2012)

4.2 Impact of regulatory decisions and actions In this situation of on-going Internet dynamics the Norwegian regulator has analysed the new type of actor – Content Distribution Network (CDN) – and concluded that there is no need to regulate CDNs according to net neutrality principles (NPT, 2012a). Hence, CDNs are regarded as belonging to the content layer. The framework of the content and network layer is a prerequisite for the current understanding and decisions on net neutrality and coherent with the three-level hierarchy of 1-3 tiers. It is though necessary to stress that CDNs – and other types of actors handling content – may act as logical networks. Thus they are autonomous systems (AS) holding IP addresses. As such they partake in the market for Internet interconnection and interact on market conditions directly with the network layer. This is one important reason for the regulators to follow much more closely the emergent constitution of the Internet. Interestingly enough the Norwegian regulator recognizes the dynamics and uncertainty of this market, and the existence of new actors, which is interacting in a competitive market conditions. In their comments on the market they reveal the intention of the regulations, which are well functioning market mechanisms. Thus for future purposes there would be a need for suitable frameworks and metrics. 4.3 Implications on the emerging Internet landscape The Norwegian case study can contribute to a more general debate on metrics and data collection because it shows that the Internet is also local, and it is possible to collect more meaningful data on a local level. The common view is that the Internet is a global phenomenon and consists of equal peers. This is supported by the reference to how the US firms Google and Facebook dominate popular website rankings throughout the world. The existence of such global actors further supports the concept of equal peers, and how easy it is to establish an enterprise with global reach within the net neutral Internet. Data will flow unobstructed across the globe and across networks. This view was also the researchers’ expectation on what to find in Norway.

To a large degree the Internet is global with equal peers. The continued dominance of this perspective can be explained by a difficulty to identify other structures looking only at the US Internet. The finer details of the constitution of the Internet drown in volume in the US. In the United States there are more than 20,000 – sourced in Hurricane’s reports - AS numbers. Almost all the popular websites run their own AS number. US enterprises use .com as a domain tail, in contrast to other nations where it is common to use national tails such as .no and .se. Thus it is very difficult to separate national from international Internet firms. Finally, the pure volume of US ASs is challenging in order to identify and categorize different types of enterprises that could challenge the current understanding of the topology of the Internet. In many European countries we will find that the volume is also a challenge even while it is more common to use national domain tails. All in all this explains why a case study of the Norwegian Internet informs us in more details about the interplay between local and global Internet, as well as the diversity and structure of Internet actors and the opportunities for meaningful metrics and monitoring. Our analysis of how the Norwegian regulator deals with the emergent changes of the Internet compared to other regulatory environments can be very useful for determining how to deal with the metrics that are required. Take the case of CDNs (NPT 2012b). The status of CDNs is paradoxical in that we seem to know what they do but not what they are. How they fit into the regulatory landscape and what their role is with regard to net neutrality expectations is obscure, especially if we try to generalize across countries. •

In Norway, as long as CDNs are defined to be in the content layer, they are not governed by net neutrality requirements.

•

In Norway and elsewhere this has major implications for the sustainability of the Internet because it exemplifies anomalies in pricing.

•

In the US there may be fewer shadow carriers because they all are to be regulated by standard competition laws, while in Norway and elsewhere in Europe the use of the layered network model when deciding regulation regimes (viz. net neutrality) confuses the market, and paves the way for shadow carriers that seem to befuddle competition rules.

4.4 How to monitor the emergent Internet We suggest that the Norwegian case actually guide on what it is important to know about the Internet and which type of metrics it is necessary to collect and monitor both for the Internet actors, as well as regulatory authorities overlooking the market. Regulators wish to ensure a reasonable competition in services offerings to consumers. It is necessary to see how the actors operate in contracts and alliances in order to evaluate market dominance. In our view the minimum metrics needed for monitoring such markets require to ensure that there is: •

To determine the set of Internet actors: e.g. AS numbers in a country.

•

To provide a clear definition of the type of actor: e.g. access networks/content provisioning or hosting.

•

To build up with relevant data, a matrix with pricing models, pricing ranges.

•

To have a clear understanding of the relationships between actors, and pricing i.e. any form of interconnection: transit purchase and provisioning, public peering, private peering etc.

•

To have a comprehensive understanding of the meanings of shared ownership, alliances, cooperation, etc.

•

To retrieve general accounting information for relevant actors.

The suggested metrics do not exclude metrics that already exist, and they are coherent with monitoring competition in general. It does not mean that such metrics must be public in general, but available to regulating authorities. Thus these metrics should not be controversial, but normal governance. However, we suspect that the Internet community will perceive such suggestions as controversial and an attempt to control the “free Internet”. The Internet is today not transparent with regards to most of these metrics, and this may explain how the voices of un-free individuals have defied suppressing authorities. It is however also possible to describe Internet as a commercial, market based systems that should adhere to principles for competition regulation. A major remaining challenge however, will be how to relate to the global vs. the national Internet. The case of the Norwegian Internet is a wake-up call for regulators looking to define which metrics are required and how to measure and triangulate values. Clear policies are needed to allow competition but also fair pricing established for incumbents that allows further expansion, maintenance and upgrade of current network. This situation raises the issue of looking at coordination with other regulators, to have the same kind of data collection. There are going to be issues with the formatting of the data in terms of time span and accuracy.

5. Concluding remarks In this article we have discussed how the experiences from the Norwegian case can inform the discussion on what policymakers would need to know about the emerging Internet, and what metrics that would be required – in order to cater for predictable market conditions that meets regulatory goals and ensure innovation and investments. Our study has shown that regulatory authorities are making decisions in the midst of dynamic Internet changes, recognizing the dynamics but still basing decisions on a traditional understanding of a layered Internet. There is a clear need for close monitoring and building of understanding in the emerging Internet in order to fulfil regulatory intentions. Our case study illustrates that measuring the Internet is complex, because the Internet is developing as we speak, and important data on actors; business activity, relationships, traffic and contracts are voluminous, highly distributed, not publicly available and thus difficult to follow. The Norwegian case shows however, it still is possible to collect and analyse data that give better insight into the Internet’s population, structure and business models. Firstly, the Norwegian case study supports the existence of a more diversified and thus complex Internet. Next, the actors – autonomous systems - are clearly structured around hubs with different motivations and business models. Finally, our analysis shows a national, Norwegian Internet, additional to the global. Norway seems to be well suited for studying local aspects of the global Internet due to its smaller size, structure and openness. The specificity is also the most important limitations of the case. The findings would need to be confirmed by studies in other countries, as well as other types of analyses. Similar data collections and analyses should be accomplished in other markets. From our perspective, observing that the emergent Internet has no longer only a layered structure, we conclude that the Norwegian regulators’ view on the Internet will be challenged, that they expect to be challenged and consequently will need new metrics to build new understandings in future. For now, it seems to be that regulation and competition law – opposite to innovation and technology - will be determining the future of the overall Internet, the effects of this approach in the development of the Internet are still to be evaluated.

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