When broadband service is characterized as an “information superhighway” the domestic and international links used for medium and long haul carriage aggregate traffic from many individual users. First and last kilometer links may serve only one subscriber, or a small group in close proximity, but so called backbone networks use very high capacity transmission facilities that carry the traffic of many subscribers. Carriers can maximize network efficiency by collecting traffic and injecting it onto high capacity transmission lines for carriage over long distances. Multiplexing provides the traffic loading process whereby the traffic of many individual subscribers is combined for carriage by high capacity cables and wireless links onward toward the final destination. Demultiplexing unloads and disaggregates inbound traffic so that the ISP can route content to the appropriate end user.

Domestic backbone networks use the same transmission technologies as international backbones with the same goal of providing full connectivity. However there exists a likelihood that domestic backbones may not reach remote and hinterland locations, particularly in developing countries. Even if two distant cities share access to a domestic backbone, localities situated between these two hubs typically do not have the traffic and financial resources to persuade network operators to install branches off the backbone trunk. 

International connectivity has become certain thanks to sufficient demand and the competitive necessity of having to offer widespread network access throughout the world. Such certainty does not exist for domestic connectivity even in developed nations, because both private and public carriers may have determined that they cannot generate sufficient revenues and profits when serving remote locales. Accordingly domestic backbone networks may link different urban centers, including ones separated from more closely situated cities. For example, Perth, in Western Australia has reliable, high speed broadband connections to all of the other Australian cities located a significant distance to the east. However, some localities far closer to Perth than Perth is to the other major Australian cities currently lack access to similar domestic connectivity.

Domestic backbone networks can be analogized to the multi-lane long haul national highways that traverse great distances. For subscribers close to these networks access is a relatively easy and inexpensive undertaking, far cheaper than the cost of installing a new highway interchange. Both copper and fiber optic networks can be spliced to add short haul branches. But for subscribers located farther away, a carrier may not consider the necessary branch link an affordable investment based on the distance sensitivity of the investment, i.e., the cost rises in direct relationship to distance from the backbone. As the branch line increases in length the population of prospective and actual subscribers may not increase sufficiently to offset the higher costs. Put another way, the cost of backbone construction, operation and maintenance requires a degree of population density sufficient to generate adequate subscribership and revenues for the carrier to recoup costs and accrue a reasonable profit.

Many ISPs seek to offset the high cost of serving remotely located subscribers by averaging the total cost of network operation. Cost averaging makes it possible for ISPs to offer a single monthly subscription rate not based on an individual subscriber’s actual distance from a backbone and ISP switching facility, or the distance between the subscriber and sources of content. Cost averaging creates the impression that Internet access is “distance insensitive,” i.e., that the cost of providing service does not vary with the distance between subscribers and ISP facilities and between subscribers and the source of content they seek. Internet carriage of traffic does cost more as distance increases, but ISPs willingly have averaged costs to offset and mask the difference. Subscribers pay the same monthly rate regardless whether they seek content from far away sources, or from nearby ones. ISPs may offer tiered service at different prices, based on the total volume of content downloaded and uploaded, but without reference to the overall distance traveled by the content.

ISPs operating domestic backbone networks also incur the cost of having diverse and redundant routing options for each link. To provide high quality of service, ISPs need to design, install, operate and maintain two or more links, so that all routes have an alternative routing option in the event the main link becomes congested or inoperative, e.g., from a cut in the cable. Routing diversity refers to having two or more physically separate, but interconnected networks, typically operating in a ring, so that an indirect and more circuitous option exists during an outage and congestion in the more direct route. Redundancy refers to the ability of a network operator to offer subscribers more reliable service, perhaps backed up by a quality of service guarantee. The TCP traffic management standard supports near instantaneous traffic re-routing from the main line to alternatives in the event of an outage or congestion.

Australia's National Broadband Backbone

Source: ARN, NBN adds 300,000 premises to fibre footprint, releases details of full coverage(July 30, 2010), available at: http://www.arnnet.com.au/article/355196/nbn_adds_300_000_premises_fibre_footprint_releases_details_full_coverage/

From Legacy Pipes to a Utility Pipe

Source: Robert James and John de Ridder, “Fixed broadband – Australia’s next utility”, Communications Policy Research Forum (Sep. 2008), available at http://deridder.com.au/files/Fixed%20Broadband%20is%20the%20Next%20Utility%20Final.pdf

Backbone Networks in Botswana

Source: The World Bank

  • 5.5.1 National Links

    National links refer to domestic backbone networks as well as other facilities that provide high capacity and fast bit rate connections to backbone networks. Such non-backbone networks include branch lines or “backhaul” facilities that link specific localities, users and widely dispersed facilities, such as wireless radio tower sites, to a backbone network. Additionally national links provide so-called middle mile services that provide transmission services between first and last kilometer facilities, which originate and terminate Internet traffic, and long haul networks, including domestic and international backbone networks.

    Carriers may price national links on a distance and usage sensitive basis, resulting in far higher total and per unit of capacity rates than what backbone carriers charge. Comparisons to first and last kilometer costs are difficult, because at the retail level, such subscriptions cover Internet access which factors in both the cost of conduit access and arguably includes a contribution to defray the cost of the content made available.  An end user Internet access subscription also includes the local ISPs’ peering and transiting costs for securing access upstream to other ISPs that participate in the set up of multiple network links to achieve a complete connection from end user to content source, regardless of location. 

    Middle mile and backhaul markets tend to have less competition resulting in fewer redundant and diverse routing options.  ISPs typically first concentrate on installing domestic and international backbone facilities so that the largest volume users, typically located in urban locales, have access to the rest of the world as well as at least one high quality, reliable link between domestic urban centers. ISPs extend the geographical reach of facilities that access backbone networks, perhaps with more emphasis on geographical coverage as opposed to accommodation of the middle mile and backhaul needs of specific users. 

    In many instances, for different reasons, broadband users in both developed and developing nations, may incur steep charges for access to national links. National broadband plans typically address how to stimulate private investment in facilities that extend broadband networks into remote, hinterland locations. Many nations emphasize private-public partnerships that combine government and private sector resources.  Governments can create financial incentives, but also contribute to projects by offering rights of way for the installation of ducts and towers used by transmission facilities. Governments also can facilitate sharing in the cost and use of networking infrastructure by rewarding carriers that work conscientiously to pool resources without conspiring not to compete, or to fix prices. Given the high costs in broadband infrastructure construction, competing carriers should not always have to build separate telecommunications lines and switching facilities. Where existing conduits and rights of way are available, governments can promote shared use.  Many of the competing long haul telecommunications networks in developing countries started by using existing rights of ways secured long ago by railroads, electric utilities and gas pipelines.*

  • 5.5.2 Internet Exchanges

    Internet exchanges provide a much needed interconnection point for ISPs providing local, regional, national and international service. Because no single ISP typically owns or leases all the networks needed to achieve a complete every link between end user and content source, ISPs agree to interconnect their networks, often at a single facility where multiple interconnections can take place between and among many ISPs. Internet exchanges centralize and economize the network facility interconnection process, by making it possible for several ISPs to share in the cost of installing, operating and maintaining the site. Many Internet Exchanges are jointly owned by the carriers that interconnect networks. Other commercial sites are owned by real estate developers, or ventures unaffiliated with the carriers. A hybrid model combines public and private partners, much like arrangements made for airports, seaports, exhibition halls and sports facilities. A non commercial alternative uses a cooperative, or not for profit model to stimulate use of a facility and the benefits accruing to nearby service subscribers.

    The lack of Internet exchanges in lesser developed regions has exacerbated the so called Digital Divide.* The lack of international and domestic backbones, branch lines, middle mile options, backhaul routes and direct links with end users surely contribute.  However, once various networks get built by different ISPs, collectively all carriers need convenient and nearby access to Internet Exchanges to facilitate the interconnection and exchange of traffic.  Without these facilities interconnection cannot take place within the region where traffic originated, or eventually will terminate.  Instead ISPs must resort to lengthy and circuitous routing of traffic at distant Internet Exchanges.  Such “thromboning” of traffic, representative of the long tubing in the musical instrument, increases the time it takes for traffic to reach its final destination as well as the cost.

    The operator of Ghana’s Internet Exchange summarizes the benefits of having an in-country facility:

    “The value of an IXP is clear to governments, regulators, industry experts, and industry members for good reason: it usually heralds significant development and opportunities for new revenue in the local ICT industry. It is because of this eventual national pay-off that IXPs are usually financed by donations from individuals, organizations, corporations, governments, etc. One point of failure for Exchanges is attempting to finance them by means other than donations or sponsorship.”      

    “The cost of the Exchange is minimal compared with the benefits. Exchange points have two benefits (short and long term) that directly address two obstacles to ICT growth (international bandwidth costs and network latency). The short-term benefit happens overnight. Once ISPs are connected to the Exchange, they will no longer pay international bandwidth costs for local, Ghanaian traffic. This cost savings, however, is not the only value of an IXP.”

    “The long-term benefits far outweigh the short-term. Once the ISPs are connected to the GIX, latency or transit time of traffic becomes a fraction of what it was since it stays within the same network. As a result of this increased speed and reliability, additional ‘value-added’ services become possible on the national network. Exchange Points make web content hosting, audio and video streaming, E-commerce, E-governance, etc. possible. Right now ISPs and local businesses often go outside of Ghana for advanced Internet solutions such as the above, taking revenue elsewhere. With the GIX, all of that business and the revenue that comes with it can come to Ghana creating more entrepreneurial opportunities, jobs, and options for investment.”

    “In Ghana the cost of Internet bandwidth and connectivity is highest compared to the rest of the competitive world. In one sense the cost of sending a local destined email is equal to the cost of sending an internationally destined email. To overcome this anomaly, connecting to a local or National exchange in this case GIX ensures that the cost of sending a locally destined email is at a lower cost. With the offsetting of the local traffic to the exchange point, the upgrading of International links of operators can be postponed for an additional period. Therefore translating to saving on the International link capacity. These savings can further be extended to the operators customers.”* 

    FIGURE 5.32
    Internet Exchange Interconnections

    Internet Exchange Governance

    By design Internet Exchanges require the joint investment and participation of multiple carriers. The more carriers that agree to fund an Exchange, the lower their shared costs and the more routing and interconnection opportunities become available to both carriers and consumers. Because Internet Exchanges involve multiple carriers, the management and governance of these facilities may require scrutiny by governments to ensure that no single carrier, or group of carriers can dominate in ways that reduce the benefits to other carriers and Internet users. National Regulatory Authorities may require transparency in the terms and conditions for affiliation with an Internet Exchange to ensure that carriers do not collude to raise prices to consumers, or to handicap other carriers, including ones that do not have an ownership interest in the facility. 

    Internet Exchanges typically contribute to the integration and interconnection of local, national, regional and international routing options and carrier choices. However without adequate safeguards they can help bolster the market power of a dominant carrier, or a small group of carriers.  Internet Exchange governance documents should provide clear and fair terms for financial, technical and operational terms for membership by new carriers as well as their interconnection rights. Carriers should cooperate in the operation of Internet Exchanges without such collaboration leading to a reduction in competition for traffic and subscriptions.

    Best practices in the operation of Internet Exchanges include assurances that whoever manages the facility (government agency, university, non-profit association, carrier consortium, etc.) the Exchange operates in the spirit of neutrality and openness. Internet Exchanges should secure competitive bids for the construction of the facility with benchmarks in the contract for timely and cost-effective performance. The parties should agree to locate the facility in close proximity to where existing and prospective network facilities are located. The facility should have the ability to increase in size (“scalability”) on an incremental basis. Governance of the facility should ensure fiscally sound stewardship.

  • 5.5.3 Implementation Issues for Domestic Backbone Networks

    Domestic backbone networks provide the essential connection between urban networks as well as the necessary extension of broadband access beyond central business districts to suburban, exurban and rural localities. These networks bridge the Digital Divide by providing broadband access to users located in regions having less than ideal demographic and demand characteristics. The first Internet access opportunities typically become available to business users in close proximity to each other in a nation’s central business district and to switching facilities, commonly referred to as Internet Exchanges, where Internet Service Providers (“ISPs”) interconnect with each other and access cross-border links. 

    Domestic backbone construction can provide a cost-effective way to expand the geographical reach of broadband access as well as the total population served. However the capital intensive nature of broadband network construction presents numerous financial challenges, coupled with many managerial and logistical issues in implementing a business plan to build or extend a domestic backbone network. Backbone planning requires consideration of ways to maximize geographical reach and market penetration as well as strategies for economizing through the pooling of investment and sharing of costs among multiple network operators.

    Backbone networks generate substantial upfront costs well before carriers can deliver service to paying customers. As a threshold matter a single carrier or consortium of carriers must agree on the technology to be used as well as the routing of the network. Backbone networks typically use high capacity, point-to-point microwave links, or fiber optic cable. While the former may have less initial costs, because carriers can install towers at intervals of up to 50 kilometers, it offers less initial broadband capacity and does not have the capability of increasing bandwidth (“scalability”) as available from multi-strand, fiber optic cable installations.

    Most domestic backbone networks use fiber optic networking technologies, because of their initial and scalable capacity. However such terrestrial networks require a dedicated pathway for the installation of the cables, known as a right of way, and ductwork used to house and protect the cables. Backbone operators have incentives to install high capacity networks whose bandwidth capacity can increase in response to growing demand by activating additional “dark,” “unlit” capacity. Because significant funds and effort typically are needed to secure all necessary rights of way and operational authority, operators install ample capacity with an eye toward spreading the costs over the largest possible amount of bandwidth use. Many nations have licensing and permitting authority shared between a National Regulatory Authority and other administrative entities having jurisdiction over a state, province, country, or even a smaller region.

    Domestic backbone operators in both developed and developing nations need to identify opportunities for cost sharing without making it possible for competing carriers to fix prices and otherwise pursue collusive and market disrupting arrangements. Just as competing carriers can cooperate in the construction, operation and management of a single Internet Exchange, they also can share the costs of a single domestic backbone, particularly the infrastructure that can be shared efficiently. There are several components in broadband networking that are passive in the sense that individual carriers do not have to design, install and manage the technology. 

    For example, competing wireless carriers can share in the cost of installing and maintaining a tower onto which they install their own electronic devices such as transmitters, receivers and antennas. The carriers can divide up the cost of designing, constructing and operating the tower including the cost of supplying or bringing power to the site. For terrestrial networks carriers can share in the cost of acquiring rights of way to install ductwork and cables on private or public property.