The U.S. Department of Labor reports that for the fifth consecutive year the most common disruption to business was the loss of broadband internet connection, with 39 per cent of businesses reporting some kind of failure. In addition, the report concludes that long-term failure could be catastrophic.
Communication requirements for business includes credit card transactions, training, and other mission-critical functions. Business is increasingly reliant on internet communications. Ten years ago, much of this work was done on dedicated satellite communications links. However, increasingly, this transaction is occurring over telephone lines over the internet.
Mission-critical function disruptions cause extreme harm to the business. Such an outage could have serious legal and financial ramifications. Examples could threaten the health and safety of individuals (i. e. hospital systems).
In years past, mission-critical functions were managed with dedicated networks, often via satellite. But today in the U.S., hundreds of satellite communications stations every month are being decommissioned.
Growth of the Internet
Internet traffic continues to grow between 60% and 80% a year (Telecommunications Industry Association (TIA) president Matthew J. Flanigan). “The web infrastructure, and even Google’s, doesn’t scale,” said Vincent Dureau, Google’s Chief Video Technologist.
The current perception is there is a significant excess capacity in carrier networks. This has led to a reduction in investment in optical fiber installation. But according to TIA, this is incorrect. Utilizing data on historical bandwidth drivers, past fiber and equipment usage trends, and an understanding of networks, the system is near its capacity limit. Carriers in the United States are rapidly running out of bandwidth and may face capacity shortages as soon as this year.
The telecommunications sector has been in a recession since 2000. The boom and bust in telecommunications was coincidental with the boom and bust in the “dot-com bubble” of Internet stocks. The dot-coms received most of the publicity, but the telecommunications industry accounted for a larger share of market capitalization gained and lost than the dot-coms. The result has been a technology priced under replacement cost. Competitive technologies have suffered.
The Role of the HDTV Revolution
The rapid adoption of HDTV is a significant force in the system. When Joe Q. Public buys new video equipment, the DVD player’s role in the system is reanalyzed. Many now choose to download movies over the internet instead of using DVD’s. This trend is likely to continue.
“Most of the internet traffic is peer-to-peer, and most of that is video. Every year we have to invest substantially just to maintain the user experience. In fact it (investment) has actually decreased,” Richard Alden, CEO of ONO, a large Spanish Cable Company , told the Cable Europe Congress in Amsterdam.
Despite the relatively small number of users, research indicates that systems such as BitTorrent and YouTube account for more than half of all internet traffic. In 1995 the total amount of data transacted over the Internet backbone was about 1.5 million GB. By 2006, this had grown to over 700 million GB.
Jonathan Arber, a technology analyst with Ovum, said “the problem is that media companies are starting to use these peer-to-peer methods to distribute videos but the internet providers are the ones paying for it.”
ABI Research estimates that the number of video downloads to increase from 215 million in this year (2008) to 2.4 billion in 2012. This number becomes more impressive when one takes into account that a much higher per cent of those downloads in 2012 will be high-definition files, which are much larger (A non High Def DVD movie is approximately 3 GB/Hour, HDTV file size is dependent on encoding: an MPEG-2 (MPEG-2 is the standard used by the DISH Network, MPEG-1 is used by Direct TV) encoded high def movie file size is approximately 9 GB/Hour, an unencoded 1280 X 720 movie file size is over 150 GB/Hour, and an unencoded 1920 X 1080 movie file size is over 350 GB/Hour).
- By 2010, forecasts call for 80-90% of internet traffic to be video transfer.
The growth in video downloads could create an internet traffic jam that threatens the net’s development, according to Google. Websites like YouTube (owned by Google) are heightening the problem and new developments will only make the problem worse.
Bandwidth-intensive applications like video download by even a small portion of Internet users may degrade service, and may even crash the Internet, or parts of it (“Broadband Connectivity Competition Policy” FTC Staff Report, 2007).
Investment in the Internet Is Down
The Satellite Business has not been very profitable in recent years. Satellite Business Systems (a Joint Venture of Comsat, IBM, and Aetna) spent more than a billion dollars for a high speed satellite network supply satellite communication to businesses. It was a total business failure.
Currently, the trend is to rely on the fiber internet for business operations. Hundreds of remote stations (the satellite industry refers to the stations as P.E.S. or personal earth stations), are decommissioned every month in the United States. Relying on the local internet (fiber) is cheaper. The main reason that optical fiber is cheaper is that this market was funded (some say over funded) during the dot-com bubble. With the excess supply, prices are dirt cheap.
Carriers may not expand their capital-expenditure budgets, because while a bandwidth shortage is a matter of debate, a capital shortage is not. Telecom companies revenue growth has been poor. Borrowing money to add capacity is difficult in this environment. “Bandwidth brownouts” might do what current industry data seemingly cannot-convince Wall Street that investment is necessary.
“National and state policies toward broadband innovation and deployment directly affect the ability of network operating companies to raise investment funding in the capital markets. To the extent that these policies inject uncertainty into the marketplace, threaten the potential return on infrastructure investments, or interfere with the ability to operate the networks in a way that maximizes capacity and efficiency, such policies would directly and negatively limit the ability of network operating companies to support expanding data traffic on the Internet” (David McClure, US Internet Industry Association).
The outcome of these trends is not clear. The conclusion, that the internet is likely to be overtaxed, has been reached by many, though it seems largely to be a secret outside of academia.
If the bean-counters react in time and significantly increase funding of fiber projects, none of the worst case scenarios is necessary. However prudence would dictate that business planners for mission-critical applications account for the potential of systematic internet unreliability.