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History: To understand the ICAIS controversy, one has to step backwards in history. In the late 1980s, NSF built the NSFNET, the first Internet Backbone. Unlike ARPANET which provided complete network service, NSF's goal was to only provide a backbone long hault network with which the regional networks would interconnect. In so doing, NSF created the structure of the modern Internet with Internet backbones, regional networks, and local networks - and interconnection points. It was the goal of NSF that NSFNET would by the paradigmatic "network of networks," glueing together the disparate regional networks that were forming at that time.
NSFNET was a tremendous success. Those regional networks that wanted to take advantage of the NSFNET would have to make their way to an NSFNET connection point, paying all the costs. If international networks wanted to take advantage of NSFNET, they too would have to pay the full costs of getting to NSFNET.
Eventually NSFNET privitized and set up private exchange points for commercial traffic. Network topology still largely followed the structure set forth by NSFNET. In order to exchange traffic, networks would bring their traffic to one of these exchange points. Traffic from one side of the street in Austin, Texas going to the other site of the street might be brought to Northern Virginia, exchanged, and then brought back. This was also true of countries. Traffic from within a country or between countries would be brought to the United States, making the United States a global exchange office. [Hussain Historic Role CIX 1] [International Internet Interconnection p. 7-8, 9 ITU 2007 ("In many cases, even when peering arrangements are available, some ISPs may choose to pay for transit for a number of reasons. For many countries, the incremental cost of using high capacity links to the US together with the lower transit fees paid to US ISPs for global connectivity is in most cases less than the cost of establishing separate routes to individual ISPs in different countries for purposes of peering, especially when the volume of traffic exchanged is low. There are also costs and other resources involved in negotiating peering arrangements with different parties." "When the internet was commercialized in the early 1990s, non-US participants had to connect to the US for access to content and for international delivery.")] [Kissangou slide 4 ("simple Internet communications between neighbouring African countries are often routed via the US or Europe")]
Local interconnection would solve this problem, but NSFNET and the American networks had the head start. In time, networks would interconnect locally, but at that time they used the infrastructure and arrangements that were available.
It is in this precedent and environment that the future ICAIS controversy would be born.
Derived from The Digital Handshake: Connecting Internet Backbones by Michael Kende, Director of Internet Policy Analysis; September 2000. [ Text | Word97 | Acrobat | News Release ]
Controversy: In recent years, a number of non-U.S. carriers have objected to the interconnection agreements governing the flows of Internet traffic between international points and the United States. Telstra, an Australian domestic and international carrier, has claimed that "to access U.S.-based Internet sites U.S. carriers have insisted that foreign carriers pay for both of the required international half-circuits, i.e., for 100% of the cost of the international link." Telstra claims that roughly 30 percent of Internet traffic flowing between the United States and Australia is flowing from Australia to the United States, "due mainly to U.S. Internet users increasingly drawing on Australian Internet content." Because Telstra pays for the entire link between Australia and the United States, Telstra claims it is effectively subsidizing U.S. carriers and U.S. ISPs whose customers are accessing Australian content. In 1999, Telstra estimated that "Australian ISPs will incur costs of around $175 million to support provision of internet services by US ISPs to their US customers." Telstra also argued that the current pricing arrangements "appear to be unjust and unreasonable in violation of Section 201(b) of the Communications Act." Similarly, in January of 1999, a number of other Asia-Pacific carriers sent a letter on this subject to a number of U.S. backbone providers, and business, government, and Internet organizations, in which they claim that "the increasing demand for information from the [Asia-Pacific] region and the bi-directional traffic make the [ISPs] in the US in effect free-riding on the circuits and gateways/ports provided by the [Asia-Pacific] region ISPs."
From International Internet Interconnection, p. 10 ITU 2007:
"For ISPs outside the US, international internet connectivity involved paying for the cost of the transmission link to the US as well as the cost of delivery within the US. In the 1990s, these backbone services were mostly bundled and sold by International Backbone Providers (IBPs), in particular Tier-1 ISPs with little price flexibility. Non-US ISPs were required to pay the entire cost of the transmission link (full circuit) to the US despite the fact that traffic flowed in both directions. In 1993, for example, the price of capacity from Australia was over USD100 000 per Mbps per month. Transit within the US also had to be purchased by non-US ISPs while Tier-1 ISPs enjoyed settlement free peering amongst themselves."
As a remedy to their perceived problems with the current system, Telstra proposes that "under an equitable regime the cost-allocation of Internet capacity must reflect the traffic flows." Similarly, in their letter, the Asia-Pacific carriers requested that U.S. backbones" share the cost of international Internet backbone between the US and the AP region according to their usage or benefits" and urge a study of the "actual traffic as the basis of usage-based or cost-oriented charging and settlement arrangements."
A couple of international organizations are currently studying the international Internet cost-sharing issue raised by the non-U.S. carriers. The Asia Pacific Economic Cooperation (APEC) forum has raised this issue, under the rubric of international charging arrangements for Internet services (ICAIS), in 1998 at a Ministerial meeting on the Telecommunications and Information industry in Singapore. The Ministerial Declaration called for "the study, and, if and when appropriate, development, by the next APEC Ministerial Meeting on Telecommunications and Information Industry, of compatible and sustainable international charging arrangements for Internet services.." The Terms of Reference for this study solicited, "[i]f and when appropriate, and based on the findings of the study, proposals on the kinds of market and costbased commercial and/or regulatory responses necessary to create more compatible and sustainable international charging arrangements for Internet services to promote the further development of and access to the Asia-Pacific Information Infrastructure (APII)."129 The United States, in a background paper to the APEC Telecommunications Working Group, maintained that "there is no need for government intervention into relationships between Internet Service Providers." The United States further contended that "cost efficient arrangements for Internet traffic will continue to be worked out most quickly if the market is not hampered by government regulation."
The ICAIS study commissioned by APEC was recently completed; while the authors discuss various Internet charging mechanisms, they do not make recommendations or express opinions about the imposition of such charging mechanisms. However, they made several relevant findings. First, the authors found that "[t]rans-Pacific and intra-Asian capacity is more expensive and less competitive than is the case within North America, on trans-Atlantic routes, or within Europe."133 Second, they found that "North American and other backbone carriers are expanding rapidly in the Asia-Pacific region." Finally, they found that "the rapid deployment of new capacity will dramatically reduce the unit cost of international charges [for Internet services], irrespective of the structure of the charging arrangements."
Based on the instructions adopted at the 1998 APEC Ministerial Meeting, the ICAIS issue was again on the agenda at the APEC Ministerial Meeting on Telecommunications in Cancun, Mexico from May 24-26, 2000. At this meeting, the Ministers reaffirmed "the importance of mutually beneficial arrangements on [ICAIS], to allow a continued expansion of the Asia Pacific Information Infrastructure." The Cancun Ministerial Declaration stated that "Governments need not intervene in private business agreements on International Charging Agreements for Internet Services achieved in a competitive environment, but where there are dominant players or de facto monopolies, governments must play a role in promoting fair competition." However, the Programme of Action resulting from the Ministerial notes that the APEC Telecommunications Working Group (TEL) should continue to discuss charging arrangements, noting that these arrangements should account for traffic flow patterns.
Several reports on this issue have not supported any active government role in regulating international interconnection arrangements. The Organization for Economic Co-operation and Development (OECD) argued that "[a]t this stage, the best way forward is for industry to initiate discussion on the financing of Internet traffic exchange, for example, via the Asia-Pacific Internet Association's call for comments and other industry forums. The role of government is to stay abreast of these discussions and support industry-led solutions." In December 1999, the International Telecommunications Union (ITU) Telecommunications Sector Study Group 3 (ITU-T/SG3) issued a report arguing that "the PSTN costing model is inappropriate for the Internet," but the group was otherwise "unable to develop an agreed set of principles on the equitable cost compensation between circuit providers."
The first step towards changing the international Internet charging arrangement status quo came from the ITU-T/SG3 during a meeting in Geneva that concluded on April 18, 2000. The study group adopted a proposal, raised by the Asia and Oceania Region tariff group, recommending that "administrations involved in the provision of international Internet connection negotiate and agree bilateral commercial arrangements applying to direct international Internet connections whereby each administration will be compensated for the cost that it incurs in carrying traffic that is generated by the other administration." This draft recommendation will be submitted to the ITU World Telecommunications Standardization Assembly (WTSA) for approval. The WTSA meets in Montreal in September 2000. The recommendation did not explain its departure from contrary conclusions that emerged after two years of study by a rapporteur's group established by Study Group 3 itself. The United States has submitted to the WTSA meeting formal contributions in opposition to both the substance of this recommendation and the procedures used in its adoption.
ITU D. 50: In late September- early October 2000, the International Telecommunication Union (ITU) convened its quadrennial World Telecommunications Standardization Assembly (WTSA). The WTSA, among other activities, adopted -- with a U.S. reservation -- a policy approach (Recommendation D.50) on charging for international Internet traffic between carriers (ICAIS). This policy approach is representative of ITU member states' views on many related development issues. The new approach not only poses a threat to an unregulated Internet but also to numerous other U.S. international communications policy interests. After extensive debates on how to chart the future of ITU's Telecommunication Standardization Sector (ITU-T), agreement was reached on a work program for the next four years, which will promote interconnectivity and interoperability among networks, products and services in a multi-vendor, multi-platform competitive environment. In December, an ITU-T subgroup, Study Group 3, initiated activities to implement Recommendation D.50 on a global basis. NTIA has participated in all these bilateral and regional fora with several aims: to promote greater localized and regional Internet buildout (infrastructure and content) using competitive models; to connect as many people as possible to the Internet on an affordable basis; to ensure investment incentives remain for greater Internet development; to advocate domestic privatization of state-owned telecommunications entities that now provide Internet wholesale connections, and other competitive reforms to ensure greater affordability and supply channels; and to focus on solutions that do not lock in current traffic and network design asymmetries between the United States and points overseas. NTIA Annual Report 2000
Market Based Solutions: From International Internet Interconnection, p. 10 ITU 2007
Increased International fiber
- Local Peering so that local traffic is not using the USA as a switching office
- Public Network Access Points or Internet Exchange Points where networks could come together and interconnect.
- More backbone providers in the market
ITU-T Recommendation D.50 (See Appendix 1 2006, 2004 Amendment 1)
International Internet connection
"The World Telecommunication Standardization Assembly (Montreal, 2000),
the sovereign right of each State to regulate its telecommunications, as reflected in the Preamble to the Constitution,
a) the rapid growth of Internet and Internet protocol-based international services;
b) that international Internet connections remain subject to commercial agreements between the
parties concerned; and
c) that continuing technical and economic developments require ongoing studies in this area,
that Administrations involved in the provision of international Internet connections negotiate and agree to bilateral commercial arrangements enabling direct international Internet connections that take into account the possible need for compensation between them for the value of elements such as traffic flow, number of routes, geographical coverage and cost of international transmission amongst others."
APEC Principles on International Charging Arrangements for Internet Services
Internet connectivity is an essential element of the global information infrastructure that should be encouraged to strengthen the Asia-Pacific Information Infrastructure.
Governments need not intervene in private business agreements on International Charging Agreements for Internet Services achieved in a competitive environment, but where there are dominant players or de facto monopolies, governments must play a role in promoting fair competition.
Internet charging arrangements between providers of network services should be commercially negotiated and, among other issues, reflect:
- The contribution of each network to the communication;
- The use by each party of the interconnected network resources; and
- The end-to-end costs of international transport link capacity.
WSIS Agenda for the Information Society Para 50: (see WGIG)
We acknowledge that there are concerns, particularly amongst developing countries, that the charges for international Internet connectivity should be better balanced to enhance access. We therefore call for the development of strategies for increasing affordable global connectivity, thereby facilitating improved and equitable access for all, by:
a. Promoting Internet transit and interconnection costs that are commercially negotiated in a competitive environment and that should be oriented towards objective, transparent and nondiscriminatory parameters, taking into account ongoing work on this subject.
b. Setting up regional high-speed Internet backbone networks and the creation of national, sub-regional and regional Internet Exchange Points (IXPs).
c. Recommending donor programmes and developmental financing mechanisms to consider the need to provide funding for initiatives that advance connectivity, IXPs and local content for developing countries.
d. Encouraging ITU to continue the study of the question of International Internet Connectivity (IIC) as a matter of urgency, and to periodically provide output for consideration and possible implementation. We also encourage other relevant institutions to address this issue.
e. Promoting the development and growth of low-cost terminal equipment, such as individual and collective user devices, especially for use in developing countries.
f. Encouraging Internet Service Providers (ISPs) and other parties in the commercial negotiations to adopt practices towards attainment of fair and balanced interconnectivity costs.
g. Encouraging relevant parties to commercially negotiate reduced interconnection costs for Least Developed Countries (LDCs), taking into account the special constraints of LDCs.