Showing posts with label New York Times Co.. Show all posts
Showing posts with label New York Times Co.. Show all posts

27 March 2009

The Economics of Snooping on Internet Traffic.

March 25, 2009, 2:30pm

Update | 2:07 p.m. Details of the Cox and Comcast approaches modified.

Kurt Dobbins, the chief technical officer of Arbor Networks, has what he sees as a very good reason to use a machine — which his company makes — that can see every word and every picture people send and receive over their Internet service provider: Internet service providers could offer a complex menu of price plans, as cellphone companies do. He predicts you will soon see many plans that impose usage caps in peak times, but unlimited use off peak.

That thought may well be red meat to the many people who think the Internet should always be unfettered by any limits.

Mr. Dobbins invited himself over for coffee recently, not to talk about Internet pricing exactly, but to defend the honor of this technology called deep packet inspection.

There are a lot of other things deep packet inspection can do that are perceived as rather creepy. It is great for spies and secret police, who want to know when people read or write about certain topics. It can identify people who send copyrighted files and block people from using certain programs, like BitTorrent. Advertisements can be shown based on what sites Internet users visit. And it can help Internet providers degrade the service of rival offerings, such as voice calling or video over the Internet.

Tim Berners-Lee, one of the creators of the World Wide Web, recently said in a speech to the British House of Lords that deep packet inspection is the equivalent of opening people’s mail.
The Free Press, an advocacy group, published a report on the subject last week, warning that the adoption of deep packet inspection “will open a Pandora’s box of unintended consequences that could spell disaster for the free market online.”

Mr. Dobbins said that he wished the technology had a different name. “Deep packet inspection conjures up all kinds of evil images,” he said, frustrated that what he helped invent 10 years ago has earned such a bad reputation.

Arbor isn’t in the Big Brother business, he insisted. Its technology doesn’t read the content of what people send and receive, he said; it just analyzes how much bandwidth they use and the type of information they are sending — e-mail, video, Web pages or whatever.

It is like looking at the stamp and addresses on the outside of mail, not opening the envelopes, he said.

It’s not quite so simple, however. Mr. Dobbins explained that Arbor’s machines don’t scan for copyrighted songs, for example. But they do identify packets being sent by peer-to-peer file trading programs, and they can send them to machines made by other companies meant to identify copyrighted content.

I’m not sure this is going to reassure Mr. Berners-Lee and other critics of deep packet inspection. Arbor, to continue the postal imagery, is like a person who sorts through the mail looking for suspicious packages, handing them to another person to open.

What about the business Arbor says it is in: helping Internet providers reduce costs and increase revenue by adjusting their pricing plans to the way each customer uses the Internet?

Mr. Dobbins said Internet providers in the United States should follow the lead of Plusnet, a British I.S.P. that uses Arbor equipment to offer various service plans. The cheapest plan costs 11.99 pounds ($17.67) per month. Use is capped at 10 gigabytes a month, except for unlimited use between midnight and 8 a.m. In addition, traffic is divided into seven categories, each with a different priority. At the top are fee-based services, like video on demand movies and voice over Internet phone calls. At the bottom are downloading of files from peer-to-peer networks and Usenet newsgroups.

The company offers two separate upgraded options, each at 19.99 pounds ($29.45) per month. One has unlimited bandwidth, but similar slowdowns for downloads. Another “pro” plan has a 15-gigabyte-per-month peak limit, but promises priority treatment for downloads and other sorts of traffic. That plan also will move traffic for online games to the head of the line, because a split second sometimes can make a difference in the outcome of a fast-twitch war game.

The point of all this is to shift as much of the heavy bandwidth use to off-peak times. Most of the costs of running an Internet provider are fixed; customers pay whether they are using the network or not. But I.S.P.’s do have to invest to expand the maximum capacity of their networks to accommodate peak usage.

How much of an expense all this extra downloading actually costs is a bit of a debate. Dave Burstein, the editor of DSL Prime, says it isn’t more than the equivalent of a dollar or two per user per month. That’s hardly enough, he says, for Internet providers in this country, which have very wide profit margins, to cry poor. (In Britain, the marginal costs are higher and competition has lowered margins, he said.) But that is not keeping Arbor from selling its products as a way to cut costs.

So far a few Internet providers in the United States, including Time Warner Cable, are just exploring bandwidth caps and price tiers. More common has been an effort to use techniques, including deep packet inspection, to manage the congestion at peak times. Comcast was slapped by the Federal Communications Commission for blocking some BitTorrent file sharing without proper disclosure.

Now Comcast is using a system that will slow down the connections of heavy users at peak times, regardless of what they are doing online. Cox Communications is using the sort of approach Arbor recommends, giving priority at peak times to some uses, like voice calling and streaming media, while relegating others, like file downloads, to the slow lane. Cox’s limits apply only when customers are uploading, not downloading, informatin.

On one level letting the urgent traffic go first makes a lot of sense. But Ben Scott, the policy director of the Free Press, said that Internet providers, like Cox, shouldn’t be allowed to differentiate between different uses of the Internet.

“Some customers will value what they see as low priority as high priority,” he said. I asked Mr. Scott what he thought about the approach of Plusnet, which lets consumers pay more if they want higher priority given to their game traffic and downloads. Surprisingly, he had no complaints.

“If you said to me, the consumer, ‘You can choose what applications to prioritize and which to deprioritize, and, oh, by the way, prices will change as a result of how you do this,’ I don’t have a problem with that,” he said.

If this sort of approach does in fact satisfy the critics, I think we are very likely to see Internet providers move to more multiple price tiers, using deep packet inspection to juggle different users and quotas. And in the process we may very well expand a technical infrastructure that has the potential to assist those that want to snoop on our electronic communications.



LET THE REVOLUTION BEGIN!

Thanks for all you do!
Live
your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.

23 February 2009

Paul Krugman: The econoclast has become one of the highest-profile advocates of bank nationalization.

Craines NY
February 22, 2009 3:26 PM
By:
Aaron Elstein

Paul Krugman: The econoclast

The New York Times columnist and Princeton professor is in his policy-influencing prime, and has become one of the highest-profile advocates of bank nationalization.

Paul Krugman couldn't help but do a victory dance last week when none other than Alan Greenspan, a most-ardent defender of laissez-faire capitalism, acknowledged that several big U.S. banks would probably have to be nationalized.

"Comrade Greenspan: Seize the economy's commanding heights!" Mr. Krugman crowed on his blog.

Mr. Krugman, 55, is in his policy-influencing prime as diviner of what made the economy collapse and what painful, pricey steps will be needed to fix it. From his twice-a-week perch as an opinion columnist for The New York Times, the Princeton University economics professor is the highest-profile advocate of a once-unthinkable step: The federal government must take over Citigroup and other sick banks and carve them up so they have a fighting chance to emerge again as private enterprises.

President Barack Obama is a fan, and even ideological foes like Mr. Greenspan have come around.

"We're all socialists now," Mr. Krugman says. "No one is talking about the markets solving this problem on their own anymore. We're going to rescue the banks. The question is how."

To Mr. Krugman, who won the 2008 Nobel Memorial Prize in economics for his research on trade patterns, the rescue path is obvious: The feds must pump more cash into Citi and perhaps Bank of America and a handful of other institutions, because no one else can provide them with the funds needed to cover the enormous losses they still face.

In exchange for that cash, he says, the government should receive a dominant ownership stake, just as it did when it rescued American International Group last fall. Then Uncle Sam, which had ample experience two decades ago seizing failed savings and loan institutions and taking custody of toxic assets, must reprivatize the cleaned-up banks as quickly as possible.

"'The logic is really pretty compelling,' Mr. Krugman says. 'The goal is to get the financial system functioning again, and this is the quickest way to do it.'"

Mr. Krugman came to this dramatic conclusion not long after Lehman Brothers and AIG went under, and the full extent of the financial crisis started to become clear. In late September, his Times blog linked to a nationalization plan drawn up by University of California economist Brad DeLong that Mr. Krugman called a "good solution." He has advocated for nationalization in more than half his columns so far this month.

"Krugman's been terribly influential in presenting an idea that scares people at first," says Simon Johnson, a professor at Massachusetts Institute of Technology and former chief economist at the International Monetary Fund.

Unsurprisingly, the concept is anathema to what's left of Wall Street. Critics say nationalization could not only wipe out bank shareholders but hurt bondholders—many of them other banks, which can't afford more hits.

Jamie Dimon: Stop the n-word!

"I think it's very important that people stop talking about nationalization," J.P. Morgan Chase & Co. Chief Executive Jamie Dimon said earlier this month at The Future of New York City conference, sponsored by Crain's. "Loose talk about nationalizations, insolvencies—I don't think most people who talk about insolvencies have any idea what they're talking about."

Mr. Krugman responds with a quip, "What else would he say?" More seriously, he adds that J.P. Morgan appears to be in sounder shape than other big banks.

The professor agrees that the government should find ways to protect bondholders. But he acknowledges he hasn't thought much about the mechanics of nationalizing a bank as big as Citi, which has $2 trillion in assets and faces another $173 billion in losses, according to CreditSights. Mr. Krugman suggests that more will be clear after officials in the Obama administration give a "stress test" to assess whether leading banks are technically insolvent—that is, whether their capital and reserves can cover the declining values of their loan portfolios.

Even Benn Steil, director of international economics at the Council on Foreign Relations, who has sparred with Mr. Krugman for years—"I hesitate to agree with Paul Krugman, particularly now," he says—believes the government has no choice but to nationalize some big banks. It can't continue shoveling money into them and guaranteeing losses, he says.

Mr. Popular

Continuing on the current path creates "zombie banks" that have incentives to take huge risks with their capital to recover losses, Mr. Steil says. "I wouldn't argue [nationalization] is a no-brainer or an easy thing to do, but compared to the other options, maybe it's the best."

Mr. Krugman's Times columns and frequent TV appearances have made him as big a celebrity as chief executives or star money managers were in the boom years. The New York native, who has a doctorate from MIT, now gets about 100 public speaking requests a month, according to his booking agent, Bill Leigh.

"There's enormous demand for economists who called the crisis right," says Mr. Leigh. His clients also include NourielRoubini , who made his reputation predicting banks' monstrous losses, and Robert Shiller, who forecast the end of the housing bubble.

Mr. Krugman won't divulge how much money his appearances command but says his fee has risen—though not to "Clinton levels," he insists. "I'm one of the 0.1% of the population whose income has gone up as a result of the crisis, but on the whole, I'd rather it didn't."

The Nobel laureate's personal finances were enhanced last December with a check for 10 million Swedish kronor, now worth about $1.1 million. Changes in foreign-exchange rates hurt the value some, Mr. Krugman says. Yet, like almost everyone else, he is electing to preserve his assets rather than deploy them.

"So far, that money is sitting in a very safe bank," he says.


LET THE REVOLUTION BEGIN!

Thanks for all you do!
Live your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.