1 From ISP/ICP Business Models to Internet Economics Dah Ming Chiu Chinese University of Hong Kong
2 Self introduction ~20 years in industry (Bell Labs, DEC, Sun Labs) in US and ~10 years as a professor in CUHK, Hong Kong interested in Internet economics, and have written some papers (mostly abstract) Will talk about trends and issues in practice not an expert of Internet businesses in China; will use some examples for discussion
3 ISPs in China The two giants: China Telecom China Unicom There are some local ISPs, much smaller scale Education network: CERnet (20M users from universities)
4 Major Content Providers and OSNs The big three Internet companies: Tencent Instant messaging, games etc Baidu Google of China Alibaba ebay or Amazon of China Social Networks: Renren, Kaixin Facebook in China Sina Micro-blog like Twitter Portals: Youku, Tudou like Youtube Sohu, Sina like Yahoo
5 Major CDN and P2P platforms CDN China Cache - P2P and indexing Xunlei M active users (canceled IPO in 2011) PPLive etc got US$250M from Softbank (Feb 2011) 105M active users Tencent Instant Messaging, games, social network etc 800M+ active users Supports p2p downloading, and cloud downloading
6 Network convergence in China Convergence of telecom (including mobile), TV broadcasting, with Internet A lot of regulation issues - these industries are under different ministries Re-alignment of vertical businesses Important questions: Who can keep the users? Who has the right to manage contents?
7 Case study: Cloud Downloading Functionality User requests content (in WWW, BT etc), especially cold content Cloud downloads, then informs user User gets content at very high speed Subscription based Provided for special Tencent members who pay After one year, ~5M active users in a month Operation Large data center to store downloaded content High BW connection from data center to major city areas Collaboration with local ISPs Via private network Via CDN
8 Illustration user Slower download, even with P2P Large file High BW path, using P2P as well when available Data Center (caching) Multi-path fast downloading cloud
9 Cloud Storage Allow user upload to cloud as well Supports large files, e.g. videos and games Content-based identity (via hashing) Detects duplicates authentication Is it also a networking service?
10 Cloud services from US Google YouTube, Gmail, etc Amazon Silk Netflix
11 Big idea 40 years ago To support dynamically arriving elastic traffic replace circuit switching by packet switching -> statistical multiplexing >>>> Internet
12 New big ideas To support large scale content distribution Use multi-path and load balancing -> true congestion control Use replication/caching along the way -> transport sharing Use dedicated/private network -> qos >>>> CDN, BitTorrent, Youtube, Cloud downloading
13 Two roles for networking services Public good Universal information access, and connectivity Freedom of speech (?) For profit services Content distribution Social clubs Indexing, search, recommendation Commerce, banking Business needs
14 Key ingredients for any business 1. Good stuff to sell e.g. content 2. Quality of service 3. Channels to reach customers Is Internet good at these? - It is essential for (3) - Surprisingly, it is also good at (1) to some extent where cometh the content in Youtube, Facebook? - It is not adequate for (2) that s why private networks, storage/cache etc added
15 Future Internet picture? For-profit clouds Transit ISPs access to public net Access networks public internet
16 Access providers Access providers are the channels to users Ideally, users should have access to multiple providers Given wireless technology, this should become less a problem If an access provider is a monopoly in a local market, it should be subject to regulation
17 Transit providers They can play the role of transit ISPs; in this role, they need to deal with net neutrality type of regulations They can sell/lease fiber to cloud service providers for their private networks; in this business, there should also be equal access regulations
18 Peering Between Cloud services and access networks Similar to relationship between any business and its channels No clear conclusion of whether content is king or eyeball is king Between ISPs Bilateral peering as today
19 Net neutrality Generic analysis of a platform in economics Nice economic models of two-sided market Showing benefits of network effect in users attracting applications, and vice versa Government s control of monopoly practices This is very complicated, probably not amenable to mathematical analysis
20 Summary Brief overview of ISPs and ICPs in China Examples of business models and implementation of user services in today s Internet Analysis of technology and business trends Discussion of roles and relationships of different players Concluding observation: Internet needs to fulfill two different roles, which necessarily leads to its public and private sectors.
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