Academic journal article The McKinsey Quarterly

The Balkanization of the Internet

Academic journal article The McKinsey Quarterly

The Balkanization of the Internet

Article excerpt

If there ever was a communal model, say goodbye to it

What's ahead is market-based pricing and a smaller number of interconnected but differentiated networks

Standards will emerge as winning business webs crowd out losers

It all means big changes for service, technology, and content providers

The internet was designed to survive a nuclear war. But can it withstand the perils created by its own rapid growth?

At first glance, it's hard to imagine that the Internet - in its current form, at least - could possibly be endangered. Total users are increasing at 120 percent per year. World Wide Web(*) hosts are growing at 100 percent per year. Total spending on Internet products and services is rising at 110 percent per year. And the critical mass of users finally in place is attracting businesses that are making real commercial transactions - and consumers who are joining fledgling electronic communities.

Behind the scenes, however, the huge growth in demand from users shifting to ever more complicated applications, combined with rapid innovation, incomplete standards, fragmented competition, and unrealistic pricing policies, is producing an environment of wrenching and unpredictable change - one with which existing network service architectures. are less and less able to cope. As users begin to flee increasingly degraded Internet performance in search of more specialized services, the many networks that make up the Internet are drifting further and further apart.

This balkanization of the Internet into multiple interconnected network families, each with a distinct user community and differentiated capabilities, means that the flat pricing regime that has encouraged wasteful use and discouraged responsible network engineering will soon be gone. Instead, users will be charged for what they use. Gone, too, will be the painfully slow response times, the lost messages, and the network outages that have become all too common on today's Internet. Users will get what they pay for - even if they have to pay a lot.

The coming breakup of the Internet will affect more than just users: there will be important implications for service providers, technology providers, content providers, and regulators as well. Companies that anticipate and leverage these changes can help shape the future to their advantage, while those that cling to the failing communal Internet model will quickly find themselves left behind.

What's wrong?

Since 1969, the Internet has grown to more than 5 million host computers, serving more than 30 million users on six continents. During this growth, the mix of traffic on the Internet has shifted dramatically, from simple transfers of files between host computers to bandwidth-intensive web surfing. Real-time video and voice telephony are just around the corner. It is far from clear the communal Internet can continue to support such explosive growth.

Bob Metcalfe, the inventor of Ethernet and founder of 3Com, predicted that the Internet would collapse before the end of 1996.(*) While this dire prediction has not come true, there have been clear signs of danger. NETCOM, one of the largest Internet service providers (ISPs), went out of service for 13 hours, stranding more than 400,000 users. America Online and its 6.2 million users were down for 19 hours. Both of these outages were caused by human error, but they can also be attributed to the boggling complexity of the network and the lack of any central control or accountability.

Beyond its effect on network reliability, the rapid growth in traffic and complexity has also affected everyday performance. Bottlenecks occur regularly, not only at popular content servers, but also at the backbone routers that direct Internet traffic and at the network access points (NAPs) where ISPs exchange traffic with one another. Packets must queue for tens to hundreds of milliseconds at each router before being passed to the next one. …

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