3. BASIC TOPOLOGY OF THE INTERNET
3.1. I NTERNET S ERVICE P ROVIDERS (ISP S )
‘Internet Service Provider’ (ISP) is a generic term used to denote an entity that provides either Internet access or Internet information services. Recently and with the purpose of taking advantage of the presence of economies of scope and scale, the Internet market has experienced mergers and acquisitions, which has led to the difficulty of classifying ISPs.
First, Ramsoy (1995) asserts that the essential criteria for distinguishing among ISPs is the kind of infrastructure they own. Second, Economides and Woroch (1992) distinguish between two types of networks: An integrated network and unintegrated network. I combine their ideas to add that each of these networks has three levels of interconnection—
National, regional, and local—which may be distinguished by the kind of infrastructure owned. An integrated network refers to a network that can provide service without need for vertical interconnection with competitors. An unintegrated network in turn refers to a network that needs vertical interconnection with competitors to provide its product (see Figure 7). Horizontal interconnection is generally necessary, though.
While it is typical for national ISPs to concentrate on providing horizontal interconnection, regional and local ISPs (see below) often focus their resources on vertical interconnection.
However, with the Telecommunications Act of 1996, long-distance carriers and local phone companies are allowed to enter each other’s markets. As a result any ISP (national, regional, or local) could provide end-to-end service without having to lease lines or equipment from competitors—this is what I call an integrated ISP. Most often, though, this is not the case and interconnection agreements with competitors (see Appendix B) play a significant role among ISPs. When an ISP (national, regional or local) does not own the whole end-to-end network and thus has to pay interconnection fees, I call it an unintegrated ISP at its
corresponding level, e.g., regional-integrated ISP, or local-integrated ISP. America On-Line (AOL), for example, after many mergers and acquisitions has become an unintegrated-national ISP. MCI, Sprint, are examples of integrated-national ISPs. Also, phone companies play an essential role on the Internet. They allow interconnectivity to happen by providing (leasing to ISPs) the physical lines needed. Interconnection lines come in different speeds or
bandwidth sizes, as described in Figure 2. Finally, the end-user is a single individual, or a group of individuals (connecting through a LAN). It is in this layer that the decision of using a dedicated line versus dial-up connection is generally made. End-users pay their fees directly to the ISP and do not deal with the phone company despite it is the latter that provides the lines. Also, end-users typically purchase their own equipment for dial-up access or LAN access and computer peripherals, which needed for connection.
Figure 7. Basic Internet Topology
Internet Cloud National ISPs
NAPs* NAPs*
Regional ISPs
Regional ISPs
Local ISPs Local
ISPs
End User B End
User A
Phone Company’s Physical Lines
Basic Internet Topology
National, regional, and local ISPs also interconnect
with other ISPs.
VERTICAL INTERNCONNECTION VERTICAL INTERNCONNECTION
HORIZONTAL INTERCONNECTION HORIZONTAL INTERCONNECTION
VERTICAL INTERNCONNECTION VERTICAL INTERNCONNECTION
* NAPs includes MAEs, CIX and other similar structures.
The first national ISPs were the government-funded ARPANET and the NSFNET, but with the commercialization of the Internet, additional national ISP’s were built with funds and technology from telephone companies. Long distance phone companies own national interconnection lines, which are dedicated for Internet purposes. Investments on national ISPs are large.
The first regional ISPs also started with government funds to provide access to research centers, supercomputer labs, and universities. They included NorthWestNet, CERFnet, SURAnet, NYSERnet, BARRnet, NEARnet, among others. Here too the commercialization stage of the Internet (since 1990), allowed private companies to enter this market. Regional
ISPs are the wholesalers of the system, providing interconnection between the national ISPs and local ISPs. Their investment level is medium. Unintegrated-regional ISPs lease lines from national ISPs and sell service to local ISPs and also to end-users. Integrated-regional ISPs would not have to lease any infrastructure to provide end-to-end service, as they would own it. Some other examples of regional ISPs include, Pacific Bell, Ameritech, among others.
The first local ISPs were universities and other research and education institutions that bought service from regional ISPs and provided Internet connectivity for end-users. Today, this market is the largest of the three and there are many local ISPs. These are the retailers of the system. Generally their level of investment is smaller than national and regional ISPs.
Unintegrated-local ISPs lease lines from regional ISPs and sell service to end-users.
Integrated-local ISPs would not have to lease any infrastructure to provide end-to-end service, as they would own it.16
It is interesting to notice that one could ask how did so many people became technically knowledgeable all of a sudden, so as to open these brand new firms called Internet Service Providers. The reality is that it has been the local Bulletin Board System (BBS) operators who have increased the number of ISPs (especially, local ISPs17) by changing their name and acquiring new equipment so as to offer Internet access. They also use the Internet as an inexpensive medium to interchange data. BBSs are like On-Line providers, e.g., CompuServe, but they operate at a smaller scale.
Despite my attempt to lay out this topology, there are many exceptions and constant changes. For example, (1) an end-user through the phone company may have a direct line to the national ISP, skipping the local and regional ISPs; (2) a local ISP may also skip a regional
16 From now and to simplify things I will consider all ISPs to be unintegrated, that is, all ISPs are dependant on an interconnecting partner to exchange data: national ISP depend on regional ISPs, who in turn depend on local ISPs to carry data from end-to-end.
17 Jack Rickard suggests that in December 1995 there were 3, 240 ISPs (local, regional, and national). The Internet by the Numbers. Boardwatch. December 1995. http://www.boardwatch.com/mag/95/dec/bwm1.htm
ISP and connect directly to the national ISP; and (3) a user may connect directly to the regional ISP. That is, if the destination user is beyond the vertical interconnection scheme, then the data needs to go through the national ISPs infrastructure to reach the end-user;
otherwise, it may not need to leave the regional ISP reach.
This complex structure is what describes the Internet. An important remark is that on the Internet market there are numerous players that play the role of both suppliers and
consumers, e.g., regional and local ISPs, which serve end-users buying from their suppliers.
Full suppliers are the national ISPs and full consumers are the individual users. Also, while the national ISP’s market type may be that of a monopoly or oligopoly, the regional and local ISP’s market structure is more competitive.
3.1.1. Difference Between ISP And On-Line Service
A person can have dial-up access to the Internet in two ways. Some people have direct, dial- up, or both types of access through an Internet Service Provider (ISP) like Pipeline, Netcom, or Alternet. These ISPs typically offer no additional information services to their
subscribers. Their primary function is to provide a connection to the Internet. Others access the Internet through indirect dial-up by using an on-line service like CompuServe, America On-Line or Prodigy. Commercial on-line services make accessing the Internet easiest by offering special features such as parental controls for kids, large databases, and their prices are competitive, but generally they do not offer direct access.