Random ramblings

Saturday August 09, 2008

Wholesale DSL: Economics of Scenic Routing

In Ireland and the UK, due to the bulk of the POTS plant being owned and managed by the incumbent, former state telco, DSL tends to be provisioned on a wholesale model, where the incumbent telco is obliged through regulation to resell access to DSL customers to independent ISPs. The resale price is usually carefully regulated to be fair to both the incumbent and the market. The customer deals with only the independent ISP, who deals with the incumbent telco to arrange provisioning, etc. So the link layer (at least, immediate to the customer, independent ISP and incumbent) is something like:

customer1----telco exchange------<telco network>------ISP1
customer2----/ |                                ------ISP2
...            |
customern-----/                                 ------ISPn

The incumbent ISP tunnels the data traffic between the independent ISP and the customer (this is known as "backhaul"). So at the IP level, it looks like a single link (over which PPP is run), and the topology looks like (the customer numbers do not correspond with above):

customer1---<PPP>----ISP access----<ISP network>----<internet>
customer2---<PPP>---- router
..                    |
customern--<PPP>------/

This scheme must have management and implementation benefits, as it is a popular model. There is a reasonably clear layering, of IP and layer-2 and corresponding separation of responsibility. Maintenance and management of each layer is reasonably well decoupled, e.g. the telco can upgrade DSL head-end equipment at the exchange without having to technically interact with ISPs and the ISPs can carry out IP layer maintenance (addressing, whether to allow a PPP session, etc) without involving the telco. The only changes which routinely need interaction are the provisioning of a link between any specific customer and ISP (i.e. setting up a new customer, or changing the level of paid-for service) - to this end the telco can provide interfaces suitable for bulk updates as well as back-end<->back-end support[1].

So far... so what?

The downside to this model is that the IP topology is quite divorced from the geographic topology.[2] E.g. Imagine two DSL customers, each attached to the same telephone exchange (so they live reasonably close to each other). The IP topology between them, to which their packets are constrained if they want to communicate in some way via the internet, likely will be (at least, if we assume the ideal of competition that drove the creation of a regulated, wholesale DSL has paid off):

customer1-------ISP1------ISP2-----customer2

Because of how ISPs tend to interconnect, the chances are they'll do so at only a few locations, such as London, Amsterdam or Frankfurt (some Irish traffic might exchange at Dublin, not all though). So packets between customer1 and customer2 will wander off to some major, European metropolitan hub, before coming back to the exact same data-plane in the exact same networking device (no doubt saying a cordial hello as they pass their fellow packets still awaiting their long excursion). E.g.:

             +------------+
customer1----|  Exchange  |
customer2----| in Glasgow |
             +------------+
                   |
             <telco network>
               |       |
              ISP1    ISP2
               |       |
              LINX (London)

Such less-than-optimal routing is not uncommon in the networking world. Packets often pass close by packets of the same flow, before going off on a long detour, maybe because there is no direct route between two physically proximate devices, or even sometimes in the same device when the relationship of the flows is obscured by abstractions in the data-layers (IP over ATM, or MPLS, etc). This is because creating links and exchanging routes has a cost, particularly so in the ongoing management of a network. Physical links require technicians to setup and maintain. Logical links require network-administrators to configure. Exchanging routing information with other organisations requires further manual configuration (filters, policies) and monitoring, adding costs that further complicate the business-case evaluation and approval processes for new inter-ISP links. Further, for intra-AS forwarding, IP is perceived as hard to manage, and organisations often prefer to tunnel IP over an abstracted and flat topology, doing their network-engineering with protocol stacks like ATM or MPLS instead.

These costs mean a less-than-optimal route in a geographical sense will actually tend to be a uneconomic route, at least in private enterprise. Economics are the overriding metric, and so we should expect that routing tends to being economically optimal.

Yawn.. obvious.. So?

So one company owns and operates the DSL networking equipment, and potentially even the inter-exchange network. Typically this would result in a single IP topology, abstracted to some degree but still vaguely congruent with the physical topology, at least in the free market. In the wholesale-DSL model, the IP layer instead is provisioned primarily according to regulatory concerns. The telco is usually constrained from discriminating between ISPs, or giving itself preferential treatment where it also operates a consumer ISP. In the UK, the regulated, local-loop telco portion of BT is effectively a seperate company called BT Openreach; in Ireland, Eircom is supposed to maintain an internal chinese-wall between its wholesale and end-user operations. This distorts the economics somewhat.

E.g. often the telco itself operates an end-user ISP division. If it operated DSL head-ends as IP access routers[3], which is not too unreasonable to imagine given the example of some cable-ISPs, then at least the traffic of its own customers would stay local to the exchange. However, in the regulated, wholesale DSL model, this traffic MUST be "backhauled" to a few central locations, like the traffic of all other ISPs.

The only way the traffic could be kept local is if the telco/ISP could offer *all* ISPs the opportunity to exchange traffic locally, by the same method the telco's ISP uses. This would be difficult to do, as things stand, without unacceptable consequences.

Point please.. Or I must kill you

Ok, ok. The point, essentially, is that the benefits of competition for ISP customer-service comes at the cost of distorted economics, and IP topologies that are far less geographically optimal than those observed in single-organisation, end-user IP access networks (assuming economic efficiency isn't substantially different for both, so that the regulatory framework for DSL is the key variable). I.e.:

• The wholesale model results in a network that must cost more (and/or delivers less) than it would have otherwise, by simple comparison of IP topology alone.
• As the DSL model still results in a single, (effective) monopoly operator of the majority of the network[5] (at various levels[6]), any economic benefits likely lie primarily in competition in customer-service amongst ISPs.
• The attractiveness of multicast is reduced by the encapsulation of IP inherent to the wholesale-DSL model. If people from m different ISPs at an exchange subscribe to a multicast stream, the load on the trunk into the exchange is m, rather than 1. (Not that inter-domain, end-user multicast deployment has seen much use).
• Locality aware caching in P2P software (e.g. Joost) can not minimise load across paths that are hidden from IP (such as exchange trunks).
• It'd be interesting to read of studies on user-behaviour (traffic patterns) for MANs or NANs ("neighbour area networks", e.g. shared cable IP networks) to see if the locality makes any difference at all (with existing protocols), as well as studies analysing P2P traffic for temporal-locality to see what, if any, potential there is for significant trunk-link bandwidth savings, such as those for IPTV[4].

In short, my argument is that we're possibly in a bad place - regulating ourselves into a more costly system of delivering broadband, particularly for popular content, which becomes ever more difficult to substantively change the more the regulation encourages investment in it, which the private market likely will not be able to crack.

An Eircom executive recently, in a speech at the IETF plenary, gently argued that Ireland's DSL regulation was a disincentive to investment by Eircom (not reported on anywhere, it seems). So I'm somewhat hopeful that there's a still a chance for Ireland[7] to improve things, and reform broadband-access regulation. That's not to say we should give Eircom exactly what they want, only that they could be a driver to initiate reform, and of that itself we should not be sceptical..

With thanks to Thomas Bridge for insights and discussion on this subject (he very likely disagrees with my conclusions though).

See follow-up post on reform possibilities.

1. I can't think of a better term for "non-consumer support".

2. Obviously, this isn't new with customer/ISP internet access (e.g. dial-up, ISDN), however what is new with the arrangements for DSL is that the telco layer is increasingly (if not overwhelmingly these days) an IP-capable network, likely managed via IP (from the ADLS head-end equipment on), with parts of (if not all) of the DSL-data-delivery occuring over an IP-forwarding network (e.g. Eircom hand-off wholesale DSL as PPPoE/L2TP over IP). Ignoring the regulatory aspects..

3. Where IP capable - often the case with more modern equipment.

4. E.g. On Next-Generation Telco-Managed P2P TV Architectures, which found locality-aware caching could contain 80% of trafffic to within a DSLAM.

5. I'd be glad to hear of examples of where telco deregulation has lead to any significant access-link, "we own the wires" competition outside of juicy, major metropolitan areas..

6. The wholesale DSL model can result in mini-ISPs that run no more than DCANs (data-centre area networks), with the state telco connecting them to their customers AND their IP transit providers (perhaps unknowingly, for the latter, via more abstraction).

7. The UK, OTOH, seems to have a lot of ISPs who rely on BT wholesale DSL, so presumably that boat would be a lot harder to turn.