Busting The Internet's Bottlenecks
BUSINESS WIRE - June 28, 2000 10:59
NEW YORK, Jun 28, 2000 (BUSINESS WIRE) --
Bear Stearns Releases New Report Analyzing the Source of the
Internet's Bottlenecks and Identifying the Companies Best Positioned to Relieve the Logjam
"Busting the Internet's Bottlenecks," a new report released by Bear Stearns Internet infrastructure & services analyst Robert Fagin, provides a comprehensive examination of the key causes of congestion on the Internet and the companies whose technologies are best poised to relieve the logjam.
The scope of the report is innovative. "Rather than focus on one area of the bottleneck, we have taken a holistic approach to this analysis and have examined the problem and potential solutions from end to end," commented Fagin.
The Causes of the Bottleneck
The report discusses the three key causes of Internet bottlenecks -- lack of sufficient bandwidth at the "last mile" (i.e., the bandwidth an end-user utilizes to connect to a network); congestion at the network level (which refers to the networks themselves, whether public or private); and congestion at the backbone level, the web of bandwidth that interconnects networks to form the Internet.
The Source of the Bottleneck Is Shifting
About 50% of Internet usage is work-based, where bandwidth is more plentiful. In addition, an increasing number of home-based Internet users are gaining access to higher-speed connections, most notably via cable or digital subscriber line (DSL) technology. According to the report, there are about 3.5 million residential broadband users in the US alone. Due to the growing availability of end-user bandwidth, Fagin maintains that the bottleneck is beginning to move from the last mile to other areas of the infrastructure. "Perhaps somewhat ironically, investments in last-mile high-speed Internet connections to homes and businesses, intended to improve the quality of the Internet experience, are actually increasing the traffic load on the Internet, causing significant congestion," said Fagin.
Quality of Service Burden Shifts to the Networks and Content Providers
With increasing speeds in the local loop, the Internet's "slowness" will not be blamed on end-user access speeds much longer. According to the report, a fundamental change is occurring, with the burden of quality of service shifting from the end-user to the provider of content -- and this reality is helping to drive the significant network and backbone-level capital expenditures currently under way.
Networks Turn to "Intelligent Solutions"
Network administrators seem increasingly to be accepting the fact that simply adding more servers and bandwidth to their infrastructure is not a very scalable or economical way to cope with a drastically increasing traffic flow. Network administrators are increasingly turning to "intelligent" solutions such as caching, load balancing, and bandwidth management tools to help alleviate network-level congestion in a cost-effective manner.
The Flaws of the Existing Internet Backbone Has Given Rise to New Delivery Solutions
The Internet's backbone architecture has an inherent flaw. Since most Internet data are exchanged between networks for free, backbone providers have an incentive to invest in intra-network performance, but not in inter-network efficiency. Indeed, since backbone providers have an incentive to minimize the capacity burden on their own networks and save capacity for paying customers, they will often "dump" a data packet at the nearest point of exchange without regard for such factors as proximity to the final destination or network congestion. Lack of effective economic settlement between major backbone networks results in generally poor Internet performance and unreliability.
Because of this, a variety of data transport solutions have emerged, designed to mitigate or avoid public Internet network delays (or actually circumvent much of the public Internet altogether, routing data over privately monitored networks to ensure satisfactory delivery). The most widely discussed of these solutions are content distribution networks (CDN) and streaming media networks (SMN) such as Akamai, Digital Island and iBEAM Broadcasting. CDNs/SMNs are predicated on the premise that it is faster and cheaper to serve data-rich content from servers located close to users at the "edge" of the Internet than from centrally-located servers. Content distribution networks also protect against Web site traffic spikes, making them a cheaper, more efficient way to serve content to end-users than deploying enough servers and/or bandwidth centrally to meet peak demand capacity. "Our research indicates that CDNs/SMNs will address a nearly $50 billion market opportunity by 2010. We anticipate $6.6 billion of capital spending on CDN/SMN rollouts by year-end 2003," commented Fagin.
Another prominent cure for backbone-level congestion is InterNAP's optimized routing solution, which brings major backbones together in a private facility where data are exchanged and efficiently routed to the appropriate destination backbone, rather than leave the backbone networks to their own devices to deliver Internet content.
A Combination of Best-of-Breed Solutions Is Needed
No one single technology is expected to provide relief for Internet congestion, according to the report. "It is our belief that alleviating congestion on the Internet requires a combination of best-of-breed solutions. This reality is driving a significant number of first-mile/last-mile joint ventures and a fair number of network-level technology integration agreements. The need for end-to-end solutions to deliver Internet content with a high quality of service and the convergence of network-level technologies designed to mitigate data bottlenecks have sparked the beginning of what we believe will be a growing trend of consolidation along the bottleneck-alleviation food chain," Fagin contends.
Members of the press who would like a copy of the report or who would like to speak with Robert Fagin, may contact Russell Sherman at russellsherman@bear.com or Michelle O'Brien michelleobrien@bear.com.
Founded in 1923, Bear, Stearns & Co. Inc. is a leading worldwide investment banking and securities trading and brokerage firm, and the major subsidiary of The Bear Stearns Companies Inc. (NYSE:BSC). With approximately $24.6 billion in total capital, Bear Stearns serves governments, corporations, institutions and individuals worldwide. The company's business includes corporate finance and mergers and acquisitions, institutional equities and fixed income sales, trading and research, private client services, derivatives, foreign exchange and futures sales and trading, asset management and custody services. Through Bear, Stearns Securities Corp., it offers global clearing services to broker dealers, prime broker clients and other professional traders, including securities lending. Headquartered in New York City, the company has more than 10,300 employees located in domestic offices in Atlanta, Boston, Chicago, Dallas, Los Angeles, San Francisco and San Juan; and an international presence in Beijing, Buenos Aires, Dublin, Hong Kong, London, Lugano, Sao Paulo, Shanghai, Singapore and Tokyo. For additional information about Bear Stearns, please visit our Web site at bearstearns.com. |
