\chapter{Economics}
\label{economics}

[Note to readers of this version of the book. I view this chapter as preliminary. I think there is more to be said, but I have to figure out what it is. Comments and thoughts welcome.]

\section{Introduction}
The viability and success of a network architecture cannot be divorced from the economics of its deployment and operation. At the same time, there has been very little attention in the literature to understanding the relationship between architectural alternatives and economic viability.  

In order to understand the issues, it may be helpful to look at the current Internet as a case study, and then explore the issues that emerge in a more abstract and perhaps fundamental way.

The current Internet is composed of regions (we typically call the larger regions Autonomous Systems), which are deployed and operated by different actors. There are about 45,000 ASes active in the Internet today. Of these, about 5,000 can be classified as service providers; they offer packet carriage service to other parties. The rest are customers of these providers.  Most of these service providers (ISPs) are private-sector, profit-seeking actors. The interconnected mesh of these ASes, taken collectively, is what we call the Internet. It is the platform on which higher level services (applications) run, and has become the platform on which society is increasingly dependent. This Internet platform has taken on the status of societal infrastructure, and probably the status of essential or critical infrastructure. The Internet may not be as important as water, sewers or roads, but it is now infrastructure on which society clearly depends. 

In comparison to these other infrastructures (roads or water systems), what is distinctive about the Internet is that it has been largely built by these unregulated, profit-seeking actors. Roads and water systems are normally built by governments, and while the telephone system (our previous communications infrastructure) was built by a private sector actor (Bell Telephone/AT\&T) it was a highly regulated, government sanctioned monopoly, not at all like the ISPs of today. 

Today, we take this situation for granted. We assume we can count on the Internet to be there, and we assume these private-sector actors will continue to provide it. But this assumption should be carefully inspected for flaws.  The Internet exists because ISPs chose to enter the market with this product. Nobody forced them to do so. We could ask, looking backwards, why they did so. We should ask, looking forward, whether this situation will continue to be stable. If the Internet is societal infrastructure, can we assume that the private sector will continue to invest in it at a suitable level to meet the needs of society, and can we assume that the private sector will continue to build and operate the Internet that society wants? Perhaps investment will stagnate. Perhaps the ISPs will be motivated to mutate the Internet they offer into a different sort of platform, perhaps more closed or dedicated to specific purposes such as delivery of commercial video. 

In chapter~\ref{society} I explore in some detail what it means for an Internet to meet the needs of society, but it is necessary to begin that discussion here to identify those issues that strongly relate to economics. Should the future of the Internet be whatever the private sector chooses to deliver, or does society want to have a say in the future? If so, by what means can society have a say in shaping what the private sector does? How can ``society'', whatever that term means, even discuss and decide what its Internet should be? Is this a call for the government to step in and define the future of the Internet?

In fact, governments are starting to do so, for better or worse. The most obvious evidence in the U.S. is the sequence of efforts by the FCC to impose network neutrality rules on the Internet.\footnote{Discuss the three open orders, citations? etc. How much is needed?} One response (or threat?) by the ISPs covered by these regulations is that the rule will stifle investment. The question of whether ISPs will continue to invest, and whether they will build the Internet society wants, is not abstract. it is being acted out today as we watch. In fact, there are observers who assert that we cannot continue to count on the private sector to be the driver of the future Internet, and that the public sector will have to invest as they do in roads or water systems. [[[find a few cites--perhaps Australia?]]]  We see governments today using public sector funds to build Internet access in rural and other low-profit areas the private sector has ignored. But this approach has its own perils--why should we expect governments to have the skills and will to build something as dynamic and evolving as the Internet?  So looking to the future, an optimist may see the Internet as so compelling that it will obviously continue to be there, and a pessimist may see several paths to the future, all fraught with perils. Society must pass between Cylla and Charybdis, those eponymous perils between which society always sails, avoiding on the one hand stifling investment and on the other hand getting investment in an Internet that is not suited for its needs. It is in this space that we must consider the economics of the Internet.

\subsection{A look back}
How is it that the Internet (and the investment that brought it to market) actually happened? In the early days, the Internet was built on top of circuits constructed by the telephone company. The option of constructing new capacity dedicated to the Internet was not practical, so the early Internet worked with what could be purchased at the time--the first long distance circuits that made up the ARPAnet were 50 kb/s telephone circuits. ARPA did invest in experiments in alternative technologies such as packet radio, but one of the reasons the Internet protocols were designed to ``work over anything'' is that using what was to hand was the only way to move forward. 

In the mid-1980s', NSF took over the operation of the national backbone, and built (using public sector funds)  the NSFnet, upgrading the capacity as it was practical. This public-sector investment demonstrated the viability of the Internet as a information technology, and justified the entry into the ecosystem of profit-seeking, private sector actors. It is not clear if the private sector would have chosen to enter the market if the NSF had not taken this high-risk (from a private-sector perspective) step of ``building it to see if they came''. But even in the mid-1990s', when NSFnet was being decommissioned in favor of a private-sector offering, the appeal of the Internet as a product was not clear to many of the existing private sector actors. In a conversation about broadband to the home, a telephone company executive said the following to me: 

\begin{quote}
If we don't come to your party, you don't have a party. And we don't like your party very much. The only way you will get broadband to the home is if the FCC forces us to provide it.
\end{quote}

Of course, he thought the copper pairs into the house were the only option for broadband access. One could argue that this executive could have been more forward-looking, but given this attitude, why did the telephone companies start to invest in residential broadband? To a considerable extent, it was the emergence of the cable industry as a competitor in the residential market, using a separate physical infrastructure to deliver broadband access. Competition can be a powerful driver. 

In the U.S., the government seems to vacillate between regulatory intervention and faith in competition as a tool to shape the future. In the FCC's National Broadand Plan, the FCC, after describing a number of aspirations for the future of the Internet, wrote:

\begin{quote}
Instead of choosing a specific path for broadband in 
America, this plan describes actions government should take 
to encourage more private innovation and investment. The 
policies and actions recommended in this plan fall into three 
categories: fostering innovation and competition in networks, 
devices and applications; redirecting assets that government 
controls or influences in order to spur investment and inclusion; and optimizing the use of broadband to help achieve 
national priorities. \emph{\cite[pg. 5]{FCC-NBB}}
\end{quote}

One can realistically ask if this approach is an act of massive wishful thinking. Competition may be a powerful driver, but in what direction? What evidence is there that competition will drive the private investors in Internet infrastructure to build the Internet that the FCC (or society more broadly) desires? And as well, one can realistically ask if competition based on separate physical facilities (as between the coaxial cable infrastructure of the cable industry and the twisted pair infrastructure of the telephone industry--now both mutating into fiber) can be sustained. Dividing up the market between two or more more providers means (among other things) that the potential market for each provider (the ``take-rate'') is divided up among the competitors. But each competitor must still build an access network that passes every house. If a market has the character that the more customers a given firm has, the lower its costs (positive economies of scale at all scales), economists describe this situation as a \emph{natural monopoly}. The phone system of the Bell era was taken to be a natural monopoly, and was accepted and regulated for the public good. Perhaps the Internet of the future will turn out to be a natural monopoly, especially the access architecture. 

So the particular set of issues  that we must consider as we contemplate the economic viability of an Internet architecture are as follows:
\begin{itemize}
\item What are the incentives of the private sector to invest in infrastructure? Can it be sustained?
\item To the extent that society wants to have a say in the future of the Internet, what are the means to shape the behavior of the private sector to get the outcomes that society desires?
\item Can we assume that competition in the access market will continue, or will the future be one more defined by regulation rather than competition?
\end{itemize}

And, for each of these issues, there is the related question about architecture:
\begin{itemize}
\item Can architectural decisions shape (or reshape) the Internet ecosystem so as to better provide incentives for investment? Should we make decisions about architecture based on the assumption that the private sector will continue to build an Internet? Would different decisions be preferable if a future Internet were a public-sector infrastructure?
\item  Can architectural decisions serve to nudge the outcome of private sector investment in directions that meet the needs of society?
\item To the extent that one accepts competition as a desirable discipline in shaping the Internet of the future, can architectural decisions improve the potential of competition (including and specifically competition in providing infrastructure based on different physical facilities) as a long-term option?
\end{itemize}

Earlier, I used the term \emph{tussle} to describe the contention among actors with different and perhaps mis-aligned interests who seek to shape the Internet. I have named as the \emph{fundamental tussle} the tension between ISPs who assert that they should be able to use the infrastructure they paid for in any way they see fit, and regulators who wish to constrain how that infrastructure is used so as to pursue an Internet suited to the needs of society. 

\subsection{Scarcity}
Economics is a discipline that studies the allocation of scarce resources. If there is no scarcity, there is no need to allocate (we can all have as much as we want) and issues of economics fade into the background. So is the Internet a scarce resource? One way to look at the Internet is that once the facilities to carry traffic are in place, the incremental cost of sending additional traffic is essentially zero, so we should think about usage as free. This statement may be true in the short run, but
the Internet requires physical facilities in order to exist. These include long distance and metro fibers, residential access networks, wireless base-stations, and so on. These cost money.  So to encourage investment in additional capacity, usage has to be seen as generating cost. Providers must recover enough costs that there is a positive return on investment. It is not clear how this fact relates to architecture, but it brings into focus the critical question of who pays for the Internet, and how the money flows among the actors in the ecosystem. 

I will return to money flows in a later section. But there is a more fundamental question. Before we can ask which actors are paying for the Internet and how the money flows among them, we must ask why the industry structure of the Internet looks as it does. Why do we have the actors that we do in the Internet? Why do ISPs exist in the form that they do?

\section{What shapes industry structure?}
A useful place to start is fundamentals: can economic theory tell us anything about the relationship of system design, the resulting industry structure and the incentives of the the various actors that make up the system to invest and play their part in making a healthy economic ecosystem. In fact, there is a wonderful framework that helps to explain this space, based on the work of Ronald Coase.

The economist Ronald Coase received a Nobel Prize for his \emph{theory of the firm}, which builds on the concept of \emph{transaction cost}. When firms engage to buy and sell, there are costs aside from the actual cost of the product or service itself:  the costs of searching for the providers, the costs of bargaining, the costs that arise due to lack of accurate information about the other firms, and so on. Collectively, these are transaction costs. When transaction costs are low, efficient inter-firm competition can occur, but if transaction costs are high, a firm may incur a lower total cost by realizing the service or function internally. Competition in principle drives down costs, but not in practice if transaction costs are high. One conception of this situation is that inter-firm competition and intra-firm planning and coordination themselves compete to deliver the lowest cost of products and services. Large firms exist when and if the cost savings from internalizing the function exceed the cost savings from competition. 

The link between Coase's theory and network architecture is the role of well-defined interfaces between modules.  If an interface between modules is well-defined and easy to understand, then exploiting this interface as a basis for competitive interaction among firms may have a sufficiently low transaction cost to be viable. If, on the other hand, there is no clear interface at a particular point, it is hard to ``open up'' that point to inter-firm action, and that point will normally remain internal to the firm. So the modularity of a system like the Internet, which a technologist might think of in functional terms, is also very likely to end up defining the industry structure of the system.
 
 \subsection{Defining the relationship between the parts}
 If architecture defines the shape of the industry, what defines the relationship among the different actors? It is the interfaces defined by the architecture. In the current Internet, we see several key interfaces.
 
\paragraph{The Internet protocol and the Internet Service Provider}
The Internet protocol (IP) actually defines a number of interfaces, each of which has helped to define the market structure of the Internet. Most obviously, IP defines the packet carriage service of the Internet--the service that ``the network'' provides to the higher layers. It is the service defined by the IP specification that becomes the service provided by an Internet Service Provider. If IP had been specified differently, the business of an ISP would be different. For example, if IP had specified reliable delivery, ISPs would have the responsibility for reliability. 

The service specified by the IP spec is minimal. RFC 791 says: 
\begin{quote}
The internet protocol is specifically limited in scope to provide the
  functions necessary to deliver a package of bits (an internet
  datagram) from a source to a destination over an interconnected system
  of networks.  There are no mechanisms to augment end-to-end data
  reliability, flow control, sequencing, or other services commonly
  found in host-to-host protocols.
 \end{quote}
  
 Perhaps a different specification of the service, with more attention to the features of the service, would have created different revenue-generating opportunities for the ISPs.
 
\paragraph{The interface to the communications technology} A second interface created by the IP specification is between the service itself and the technology used to deliver it. The IP spec says nothing about the technology, other than it be able to forward sequences of bits. This decoupling, while perhaps implicit, means that the specification allows (and thus encourages) innovation in network transmission technology. Over the decades since IP was specified, there have been any number of network technologies invented, including Local Area Neworks (LANs), WiFI and cellular networks and so on. It is the limited requirement that IP places on these technologies that facilitates these innovations. 

\paragraph{The interface between the ISPs} There is a third interfaces that is relevant to the IP layer, but it is poorly developed in the original design of the Internet--the interface between ISPs. In the original Internet, the designers downplayed the importance of this interface (sometimes called the network-network interface, or NNI). That decision was perhaps short-sighted. The original designers were not thinking about industry structure--they were designing a network built out of routers. The address in the header of the packet (together with other fields in the header) defines what the router has to do when it gets a packet. Getting that function right was the initial focus of the designers.  When the architects started to focus on the fact that different parts of the network were run by different entities, there was some confusion as to how the interconnection would be implemented. One view was that there would be two routers, one belonging to each of the providers, connected to each other at the point of interconnection. Technically, this seemed inefficient--why have two routers next to each other? The alternative view was that there might be one router, jointly operated by the two providers. This idea reduces the number of routers in the system (a serious consideration at the time) but would have required some sort of division of responsibility within this one element. Only after it became clear that this idea was totally unworkable for operational and management reasons did the question arise as to what information two routers belonging to different providers would need to exchange with each other. \footnote{Today we do see the other configuration, with a common switch between a number of ISPs. This configuration is called an Internet Exchange, and a neutral third party is usually created to operate that shared switch.}

RFC 827, published in 1983, provides some insight into the level of understanding about the inter-AS interface at the time that IP was being deployed. 
\begin{quote}
In the future, the internet is expected to evolve into a set
of  separate  domains  or  "autonomous  systems",  each  of which
consists of a set of one or more relatively homogeneous gateways.
The  protocols,  and  in  particular  the routing algorithm which
these gateways use among themselves, will be  a  private  matter,
and  need never be implemented in gateways outside the particular
domain or system.

The
Exterior Gateway Protocol enables this information to  be  passed
between  exterior  neighbors.  ...  It also enables each  system
to  have  an independent routing algorithm whose operation cannot
be disrupted by failures of other systems.

\end{quote}

\subsection{The Expressive Power of the Interface}
In Chapter~\ref{expressive} I distinguished different architectures by their \emph{expressive power}. Some packet headers have richer expressive power than others, which can enable a richer set of services in the network (as well as new potential security issues). There is another dimension to the concept of expressive power, which relates to the possible set of protocols that are defined for the \emph{control plane}. Control plane protocols define the messages that can be exchanged among network elements, and if these are of global scope (that is, if all the regions are expected to agree on their meeting) they rise to the level of architecture. The only relevant control plane protocols in the current Internet are the routing protocols, and the interdomain routing protocol (e.g., the one with global scope) is the Border Gateway Protocol (BGP). 

BGP is perhaps one of the first examples in the Internet (or at least, a substantially worked out example) of a protocol that was designed to shape industry structure. The predecessor of BGP, the original EGP, assumed a hierarchical pattern of interconnection among the regions (the ASes), with NSFnet as the root of the hierarchy. If EGP had become the routing protocol for the commercial Internet, a single commercial provider would have ended up taking the place of NSFnet, in a position that seems close to an architecturally-created monopoly. BGP was specifically designed to allow for multiple, competing wide-area Internet Service Providers. 

At the same time, BGP has limited expressive power, and these limitations have arguably limited the business relationships among the interconnecting ISPs. See \cite{Feamsterthesis} for one discussion of the limited expressive power of BGP. 

At the time of the transition to the commercial Internet, industry had a clear understanding of the importance of critical interfaces. As I discussed in Chapter~\ref{alternatives}, the Cross-Industry Working Team laid out their vision of an architecture for a National Information Infrastructure \cite{xiwt}, and a central component of their conception was a set of critical interfaces, including the interface between ISPs: the network-network interface, or NII. They fully understood that getting this interface right was critical to the health of the emerging private-sector industry. The designers of Internet protocols may not have fully appreciated the importance of this interface.

\subsection{Alternative architectures}
There are some aspects of industry structure that seem to derive from more basic considerations than architectural variation. The idea that a global network is built out of parts (ASes, regions, and so on, by whatever name they are called), and that these parts have some geographic locality and are operated by distinct providers, seems common to all the architectures that I described. 

However, to see that architecture defines industry structure, consider the implications of information-centric networks such as NDN. In NDN, the provider of the forwarding layer has a much richer set of responsibilities, and access to a much richer set of explicit information in the packet headers. These providers can see the names of what is being sought, not just a end-point address, which might open up new opportunities for traffic discrimination. These providers provision caches in their servers, which are critical to the efficient operation of the protocols. They thus have control over what is cached, and on what basis. One must look at a scheme such as NDN not just through the lens of a mesh of interconnected routers, but rather as a mesh of interconnected ASes with independent profit-seeking motivations, to try to understand the economic implications of the architecture.

Architectures such as Nebula and Choicenet make the negotiation over how and whether traffic will be carried an explicit part of the design. They include a control layer (or in Choicenet an \emph{economy} layer) in which negotiation over service and payment can occur. They attempt to bring the economics of the architecture out and make it an explicit part of the design. They include new components, such as monitors at AS boundaries to verify what service is being provided, and stress the power of competition and user choice to drive the network to a desired future. 

\subsection{Incentives to invest}
What motivates a private-sector actor to invest, specifically in infrastructure for the Internet? At a high-level, investment is motivated by anticipation of adequate return on investment (RoI), and the greater the risk (the uncertainty about the RoI) the higher the anticipated RoI must be to justify investment.

Looking specifically at the communications sector, there are a number of factors that can influence investment decisions:

\paragraph{Assured RoI:} In the era of the highly-regulated Bell System, investment in capital assets was incentivized by Rate of Return regulation, which set a guaranteed return on capital upgrades. This return, which was factored into the regulated rates paid by users of the telephone system, probably resulted in over-investment, and brought the U.S. a highly engineered and reliable phone system which probably cost a bit more than it needed to, and supported a world-class industrial research lab, Bell Labs. Most economists with whom I have spoken say that a return to rate-of-return regulation would be a Bad Idea.
\paragraph{Competition:} Competition, in particular when competitors have separate physical access technologies (``facilities'') can be a powerful driver of investment. Today we seen the telephone companies and the cable companies, occasionally further goaded by new entrants gleefully pulling fiber to the home, making significant investments in upgrades to their capabilities. 

Sometimes fear of competitors will motivate investment even when the RoI is uncertain. When the telephone companies were first thinking about whether to move beyond simple deployment of DSL and contemplating advanced technologies that involve pulling fiber at least part way into their access networks, I asked an executive of one such company whether they had a clear model of what the return would be on this investment. He said more or less the following: 

\begin{quote}
We actually don't have a clear business model for doing these upgrades. But we have a clear model for what happens if we don't do these upgrades: in 10 years we are out of the wireline business. Better to bet on uncertain success than certain failure.
\end{quote}

On the other hand, a different pattern of competition, based on a different sort of regulation, can damp the incentive to invest. In other parts of the world, regulation has required that owners of access facilities (in particular the copper pairs of the telephone companies) must lease these facilities to other firms so as to create retail competition over these shared facilities. In general, the regulated rates at which these circuits must be shared has been set low to stimulate entrance into the retail market, but the facilities-based telephone companies have complained, with some justification, that they see no motivate to invest in upgrades if they carry all the risk, and at the same time gain no competitive advantage and a low RoI. 

\paragraph{Suitable pricing structures:} The current pricing structure for retail (residential) Internet access is probably \emph{not} the best structure to incentivize investment in upgrades. Flat-rate pricing (``all you can eat/send'') means that as usage goes up, the providers get no incremental revenues. Indeed, with the massive increases in usage we see today associated with streaming video, we see access ISPs moving to usage caps or tiers, which would either limit the need to upgrade or reward the ISPs for such upgrades. This transition, which has mostly happened in the mobile space, is probably inevitable in the wireline case as well.  I once had an operator (from another part of the world) quite explicitly say that in a flat-rate context, they only invest in upgrades where there is a facilities competition; in other locations they see no reason to improve the service. 

\paragraph{Architecture?} The factors above are understood to influence the incentive to invest. But what about architecture. Again, in general terms, architecture can increase incentive by reducing risk and creating opportunity. It can reduce risk if it can make the relationship among the actors clear and stable. (Of course, the fundamental goal of architecture is to produce an Internet that is fit for purpose, but that goal is more basic than just improving RoI.) Architecture can potentially improve opportunities by the creative but careful design of features that add to the range of service offerings. 

What we see in the market today is that ISPs are attempting to increase the diversity of their product offerings by innovation at a layer that exploits the IP technology, but not just in support of the global Internet. IP technology is being used by ISPs to offer a range of services, including VoIP, IPTV, and so on, as well as Internet access. In the early days of the Internet, the designers did not see this distinction as they were designing protocols. The use of the Internet Protocol (IP) was equated to the public Internet. With the emergence of IP as a converged platform for a range of service offerings, a new architectural question emerges--should the distinction between the packet forwarding mechanisms implied by IP (which can be used in a number of ways) and the creation of the global Internet (which depends, among other things, on the specification of the network-network interface, be made more explicit in the architecture? 

To a large extent, this distinction, which is becoming very important in practice today, is not emphasized in any of the architectural proposals that I discuss in Chapter~\ref{alternatives}. One could take this as a criticism of the network research community, which continues its focus on how the data plane (packet forwarding) works, rather than the sort of issues I discuss in this chapter. At the present time, it would seem that further exploration of this issue, both policy and architecture, is an open research question. For a deeper discussion of the issues, see a paper by my co-author and me~\cite{platform2014}.

\section{Money flows}
If architecture defines the industry structure, and at least some of the features of the relationship among the actors, the next question is what defines how money flows among these actors. Here are two stories:

A while back I had a conversation with a well-known economist that studied the Internet. It went like this: 
\bigskip

Economist: ``The Internet is about routing money. Routing packets is a side-effect. You screwed up the money-routing protocols.''\\ 
Me: ``I did not design any money-routing protocols!''\\
Economist: ``That's what I said.'' 

\bigskip
And another story--the creation myth of revenue-neutral peering.
\bigskip
 

It is said that when the first two commercial ISPs met to negotiate their interconnection, one of the engineer-businessmen who was at the meeting was heard to say: ``Wait, I thought \emph{you} were going to pay \emph{me} money''. They discovered that they did not even have a common basis to agree on which direction the money should flow, let along how to set an amount. Then, as the story goes, these engineers heard the sound of running feet and realized that the lawyers were coming, to start a three year negotiation over the interconnection agreement. They looked at each other and said: ``Quick, before the lawyers get here, lets agree that neither of us pays the other; we just interconnect; shake hands.'' And thus, so the story goes, was revenue neutral peering born.

So should we, as The Economist said, have designed ``money-routing'' protocols? There have actually been attempts to add ``money-routing'' to the Internet architecture. 

One of the earliest proposal was \cite{mackiemason}. This paper, one of the first to explore the economics of the Internet, proposed that in addition to a possible fixed cost for sending data, there should be a \emph{congestion price}, which reflects the cost one user imposes on another by sending when the network is fully loaded. Their approach was a \emph{smart market}, where users specify their willingness to pay, but the price charged to the users that send is the price specified by the marginal user--the user with the lowest willingness to pay that can be accommodated. This idea, which is a form of a Vickery market, provides an incentive for the user to disclose their true willingness to pay, since they will not be charged that price unless that is the minimum price that gains them admission. 

They describe this scheme as preliminary, and there are indeed issues--for example, does the user want to pay for individual packets or for an overall transfer. The authors were clear that there were many details and modifications that would arise were this to be implemented. The high-level point is that they proposed that this price be in the packet header--they were proposing an architectural component that realized a pricing scheme--money routing. 

There were a number of other pricing schemes proposed in the1990's. I dabbled in this area. In 1989, I wrote RFC 1102, on Policy Routing, which included a flag in the control-plane routing assertions to control whether the ISP should be paid by the originating ISP, the terminating ISP, or separately by the sender (as was then happening with long distance telephone service.)  In 1995 I proposed a more complex scheme, which described a more complex marking scheme in the packet header to refine the direction of money flow as packets are forwarded \cite{clark-mcknight-bailey}.\footnote{The various papers in the anthology from which that paper comes give an excellent snapshot of the state of understanding of Internet economics in 1995.}

Needless to say, none of these proposals went anywhere. 
\subsection{Architecture and money flows}
With respect to routing money, as with other objectives, if architecture has any role to play, it is not defining how the system works, but rather making it possible for a desired range of things to happen. Like the TTL field in the IP header, which allows the Internet to exploit routing protocols that induce temporary routing loops, perhaps a ``direction of payment'' flag in the header might allow a range of billing models that would otherwise not be possible. However, the networking community has so little experience with ``money routing'' that this area is essentially uncharted territory. In general, architects learn what should or could be built into the core of a system by looking at what application designers have tried to do in earlier generations. So, given perhaps two decades of experience with the commercialization of the Internet, what lessons can be learned about money flows? I find the lessons both uninformative and troubling. 

We have seen a number of changes in the pattern of money flows among ISPs since the entrance of commercial ISPs into the ecosystem. The early pattern of routing among ASes was transit: small ISPs paid large, wide area ISPs to carry their traffic to its destination. Payment went from the customer to the provider, independent of direction of the packet flow. Packet counts were sufficient as input to the billing system. The idea of ``sender pays'' vs. ``receiver pays'' (by analogy to the 800 numbers in the telephone system), never emerged and did not seem of any interest. One could argue that it might have emerged if the necessary flags in the traffic had been there from the start, but conversations with ISPs suggest that the simplicity of the bulk payment for transit, compared to the complexity of a scheme with more discrimination, was not seen as worth the trouble.  In any rate, there was never a way for the idea to be tried in the market. 

Then the payment system shifted as a result of the increased use of peering among ISPs. Peering (providing a interconnection between two ISPs so each can have access to the customers of the other) emerged as a revenue-neutral scheme, as I noted above. In parallel, the telephone system was moving in this direction, away from schemes for interconnection ``settlement'' (where the telephone companies paid each other for traffic they carried) to what was called a ``bill and keep'' pattern, where the customers paid their local telephone company, and each company retained those payments. Calls were exchanged on a revenue-neutral basis. Given that the telephone system was moving toward this revenue-neutral pattern of interconnection, there was little motivation to bring a more complex scheme into the Internet, given that it would require a complex set of inter-provider agreements, which are hard to negotiate, and can (without care) lead to fears of anti-trust sanctions. 

The next shift in Internet payment models has now emerged with the emergence of direct interconnection between content providers and access ISPs for the delivery of high-volume traffic such as video. From a routing perspective, these connections resemble peering connections, but after some very public disputes, the payment model that emerged was that the content provided paid the access ISP for the dedicated, high-capacity direct interconnections. The unstated assumption that was embedded deeply in these negotiations was the the value flow matched the packet flow--that is, the sender paid the receiver. One might have argued that when a viewer watches a video, it is the viewer that is extracting the value, rather than the sender, but this idea does not seem to have emerged in any of the negotiations. There was no question in the minds of any of the negotiating parties as to which way the money was flowing--only disagreement about the rate. No packet marking is needed to inform that sort of dispute. 

We now see more complex models emerging for payment between content providers and access ISPs, for example the idea of ``zero-rating'', where a user with a monthly usage quota can receive certain content without it counting against that quota, because the sender has paid the ISP to deliver this content. This concept is most common in mobile access networks, and without pretending that I understand the details of how it is implemented there, the complexity of the cellular networks (with rich control mechanisms, often layers of nested headers and the like) provides lots of tools to implement any required packet marking. The important observation about this context is that it is a local, bi-lateral context between the two actors, there is no requirement that the mechanisms for implementing the accounting for traffic need work across the global Internet. 

The next stage in billing may be schemes that attempt to link payment by content providers to the value of the content being delivered, rather than some formula that derives from the cost of delivery. Value pricing represents an attempt by the access providers to extract revenues based on what is delivered, and its perceived value to the sender. For example, a recent paper \cite{Courcoubetis:2016} describes an analysis of the different services provided by Google, and attempts to model the value per byte of the different flows (e.g., search vs. Youtube) so as to set a per-service fee for delivery. Whether one views this as the next stage in the future of access network funding or a throwback to telephone era settlement, the traffic classification is not going to be derived from any simple marking in the header, but by looking at fields such as port numbers, IP source addresses and the like. (In the language of Chapter~\ref{expressive}, this is \emph{implicit parameterization}.) 

The idea of service-specific billing is not restricted to zero-rating for cellular access to the global Internet. An interconnection architecture called Internet Protocol eXchange (IPX, not to be confused with Internet eXchange Point, or IXP, nor to be confused with Internetwork Packet Exchange) has been deployed for interconnection of private IP networks (not the global, public Internet), networks that support services such as carrier grade VoIP. It is used by the cellular industry to interconnect their VoIP services (which are over IP but \emph{not} over the Internet. IPX contains explicit support for per-service interconnection and cascading payments.\footnote{For a good tutorial on IPX, Wikipedia is perhaps good place to start. See https://en.wikipedia.org/wiki/IP\_exchange.} 

\section{Bad outcomes in the future}
Per-service settlement for Internet interconnection may be an example of the pessimistic fears about the future that I articulated earlier in this chapter. We see a number of forces today that might drive the future of the Internet into a darker place, including pressures from those who carry out surveillance and regulation of access to content, but economics is probably the most potent driver. As long as the Internet is a creature of the private sector, profit-seeking behavior is a natural behavior and what we must expect. 

In this respect, it may be that some architects will prefer to push for designs with \emph{less} expressive power, to prevent the implementation of sophisticated toll-booths in the Internet. Architecture is not value-free, and this is an excellent example of a place where values will be close to the surface as we make design decisions. 

It may not be possible for the private sector to recover the costs of building expensive infrastructure, if our goal is an open network. In the long run, we may need to think about networks the way we think about roads--as a public sector undertaking. Alternatively, if we do not accept that facilities investment can derive from public sector involvement, then designs that restrict  the opportunities to reap returns on facilities investment may limit revenues to the point that facilities buildout does not occur at a suitable rate. Some degree of vertical integration or discriminatory treatment of traffic (including billing) may be the price of a healthy infrastructure. Any architecture must think carefully about the extent to which it attempts to take an ex anti position on this point. If an access provider supports both a healthy open Internet and as well other services over the same IP infrastructure, is this a driver of investment or a threat to that Internet service?

\section{Summary--architecture and economics}
Architecture indeed plays a key role in the economics of an Internet ecosystem. Architecture defines the industry structure, and the key interfaces define the potential relationships between the actors. It is less clear what role, if any, architecture should play in enabling different money-routing protocols. It may be necessary to wait another 20 years to see how the economics plays out before we can see what we should have added to the architecture now. Perhaps even with the current Internet, in 20 years we may not have the ISPs that we have today, but a different set of actors trying to work within the existing architecture. If so, it will be economic forces that will make that future happen. 
 
