Networks in Telecommunications
Daniel Spulber opens the "black box" of the Internet to shed light on the structure of telecommunication networks

Daily newspapers are folding; major retail stores are closing their doors. They are among the latest casualties of the Internet's power to upend centuries-old institutions.

But at the same time, the Internet has created new opportunities for business and communication technologies — and these uses are growing exponentially, along with the networks that support them. Which raises the question: How much do we really know about the telecommunications networks that are now so integral to our culture, economy and society?

It's precisely for that reason that Kellogg Professor Daniel Spulber has co-authored a new book, Networks in Telecommunications: Economics and Law (Cambridge University Press), with Christopher S. Yoo, a professor of law and communication at the University of Pennsylvania and director of that school's Center for Technology, Innovation and Competition.

"We tend to look at the Internet as a black box," says Spulber, the Elinor Hobbs Professor of International Business Strategy. "We plug into the network, speak to people around the world and download information, services and movies. But we know little about the Internet's internal structure.

"It's time to open up that 'black box' and see how it works. We need to understand how the Internet will evolve, and no longer treat it as a novelty item."

In their book, Spulber and Yoo offer a comprehensive framework for the study of telecommunications networks. They extend theories on network design associated with the mathematics of graph theory, providing insights into the complex, systemic interrelationships among network components. They also apply the principles of transaction cost economics to analyze decisions about the boundaries of proprietary networks.

In addition, they introduce network theory into the study of the economics and law of telecommunications, looking not just at the size of networks but at network architecture.

To understand the changes in public policy on telecommunications, Spulber stresses that one must first understand the structure and function of networks. Accordingly, he and Yoo identify five types of access to networks: retail access for the consumer, wholesale access for resellers of services, access to network components by competitive service providers, interconnection access, and platform access. Each type of access has a different impact on the network's optimal configuration, capacity, and quality of service.

Platform access, for example, refers to technological standards that allow providers of content such as news, entertainment, and business services to reach customers through communications networks.  The Internet's standards provide "a nearly universal interoperability that allows all end users to access Internet applications and content on a nondiscriminatory basis," the authors note.  Instead of a one-size-fits-all approach, the authors explain that platform access should continue to embrace network diversity.

The issues raised by Spulber and Yoo are likely to grow more pressing over the coming years, as companies continue to transfer vast amounts of data over telecommunications networks, including that associated with research and development, technology, and consumer databases. Consumers, meanwhile, are placing increasing demands on the same networks, accessing movies, music, and other kinds of information online. The launch of new search engines, the growth of blogs, and the entry of Twitter all signal new and expanding use of telecommunications networks.

"The changes in the industry will be earth-shattering," Spulber says. "We are at the dawn of a large-scale information transition. Telecommunications networks are central to these developments." – Sandra Guy