Saturday, March 10, 2012

Hot Potato Routing and Real or Imagined Congestion

            Several years ago when the Internet was beginning to grow, the matter of fair sharing of traffic loads arose.  Because ISPs did not or could closely meter traffic as they can now, the possibly arose that some ISPs could hand off traffic to other carriers without detection and penalty.  The term hot potato routing refers to the deliberate off loading of traffic onto another carrier’s network.  The burdened carriers resented such “free riding” and emphasized that the hot potato routing carrier could not guarantee quality of service having handed off traffic to other carriers.
            With the passage of time and the onset of real or claimed congestion, the hot potato resenting carriers have become hot potato routers themselves.  Wireless carriers want to sell—make that give away—femtocells ostensibly so that subscribers can get better in-building signal penetration.  This positive outcome occurs, because the carrier has had subscribers install mini-cellular radio towers on premises.  But what kind of backhauling does the femtocell use?  Some operate on cellular frequencies in effect retransmitting wireless signals.  But others inject what would have been more wireless traffic into the Internet cloud via the wireless subscriber’s DSL or cable modem broadband connection.  This is hot potato routing masquerading as signal enhancement.  In reality the wireless carrier suffers less congestion and the need to cell split and install additional towers if it can offload traffic to other carriers. 
Another example: Wireless carriers don’t mind—make that are happy when—subscribers substitute wi-fi minutes of use for cellular minutes of use.  These very same carriers used to require equipment manufacturers to disable wi-fi access via cellular phones, so that subscribers had to use network minutes.  With real or imagined congestion cellular carriers can reduce capital expenditures in more plant by offloading traffic onto another carrier’s network. 
Bear in mind that such offloading often does not trigger a charge for the hot potato routing (traffic originating) carrier.  While incumbent carriers, such a Verizon and AT&T, vigorously complain about free-riding VoIP operators, which find ways to inject traffic onto their networks without compensation, Verizon and AT&T do the same thing.  Of course they can claim the need to do so results from the FCC’s inability to reallocate spectrum, or from unanticipated data service demand.  What better way to shift the blame to the FCC or those pesky, gluttonous customers?
I appreciate that ongoing high capex harms carriers’ profits, but U.S. wireless carriers do not seem to be suffering at least in terms of Average Revenue per User (“ARPU”).  These carriers have some of the highest ARPUs globally, and the elimination of unmetered and unlimited data plans promises even higher ARPUs going forward. 
Skimping on capital expenditures accrues short term benefits, but it may foreclose longer term gains.  If wireless carriers make the investment in 4G bandwidth and switching capacity, they can encourage subscribers to treat smartphones as the functional equivalent of wired computers.  Additionally they can exploit technological and marketplace convergence that promote an IP-centric network serving an ever expanding aggregate demand for information, communications and entertainment (“ICE”) services.  But the incumbent players dither: they threaten to become innovative and aggressive competitors, but back off.  Cable operators realize the need to offer a wireless component in their bundle of services, but instead want to sell their spectrum to incumbent wireless carriers.  Wireline incumbent carriers, such as Verizon, toy with the idea of offering video content, instead of serving as the conduit for the content managed and produced by others.  But this week we hear that Verizon would rather partner with Netflix than compete.
Who wants to devote sleepless afternoons competing, investing and innovating?

1 comment:

Steve Crowley said...

"Who wants to devote sleepless afternoons competing, investing and innovating?"

The Japanese and the Koreans.

The hot potato discussion is interesting. I suppose if too much home wireless data gets offloaded to a small home cell and accompanying fixed line, the user pays more for that fixed-line service, or prices do not fall as fast as they might otherwise.

I would recast your discussion on the benefits of small cells in the home (femtocells or Wi-Fi access points). At one time they were seen as filling in coverage holes. Now, they are seen as helping the capacity crunch, because it is hopeless, from an engineering view, to achieve the same capacity from increasing 4G spectrum and building more "big iron" infrastructure. Hopeless.

If I may, I excerpt two paragraphs from a recent blog post of mine related to this, followed by a link:

"Today’s typical macrocell (large cell) wireless systems have always expended disproportional resources trying to overcome building attenuation and reach user devices indoors; it’s been an outside-in approach. Adding to the challenge, we’re inside 70% of the time, and will be inside even more as time goes on, according to Informa estimates. Building attenuation is not the only indoor problem; signals indoors weaken as the distance to base stations increases. Furthermore, capacity available to a user goes down as more users join the cell.

At the same time, our indoors increasingly have fixed broadband service. This can be used in conjunction with small cells, such as Wi-Fi access points or femtocells, to offload data from the macrocell. When the user is close to small cells, a lot of good things happen, things beyond the ability of additional spectrum to provide. Building attenuation goes down because we’re not punching through as many walls. Signal strength increases because of the shorter distance. Throughput to the user goes up because capacity is no longer shared with several dozen others. (Throughput to those still on macrocells goes up, too, because they’re no longer competing with the small cell users.) As an added benefit, since the user is close to the cell, not as much power is needed on the uplink; handset transmit power goes down, increasing battery life. Taking all these factors into account, data rates available to a user can go up 80x or more using small cells depending on the deployment scenario. In contrast, doubling available spectrum increases throughput only 2x. Allocating the entire 300-3000 MHz band to mobile broadband would increase throughput only 7x, were that a practical option."

Thank you for another thought-provoking telecom piece.