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A Framework for the Next Generation Internet

September 25, 2013 - 2 Comments

It’s a very challenging time to be an economist – uncertainty is everywhere, and adapting to a market change is problematic. In contrast, if you’re a network planner you’ve now got the upper hand. You can think ahead with a degree of certainty that you’ll be prepared — no matter what the future holds in store.

That may seem like two totally unrelated thoughts. They’re actually closely aligned. Let me explain.

In July of this year, an International Monetary Fund (IMF) update reported that global growth was projected to remain “subdued” — at about 3 percent during 2013, essentially the same as in 2012. That estimate was less than had been forecast in the April 2013 World Economic Outlook.

The lowered expectation was driven by slower growth in several key emerging market economies and the ongoing recession across much of Europe.  The IMF highlighted that, across the globe, pockets of weaker domestic activity (noticeable declines in consumption) had led to capital outflow, equity price declines, rising local yields, and currency depreciation.

During the industrial age, economists would likely respond to local market volatility by recommending that policymakers focus on seeking ways to increase manufactured product exports. In today’s Global Networked Economy, many policymakers will now turn to the internet — and explore the upside potential for eCommerce related growth opportunities in international markets.

But national policymakers, and the researchers that support them, must contend with the apparent ambiguity associated with quantifying the economic realities. It’s not always clear how to proceed.

Measuring the Economic Impact of the Internet

A recent report, entitled “Measuring the Internet Economy,” summarized research performed by the Organization for Economic Co-operation and Development (OECD). Their market study examined how the Internet is shaping economies and societies around the world.

They found that measuring the Internet and its socioeconomic impacts presents significant data challenges. These include all of the same issues that are encountered when you attempt to estimate the economic impacts of other Information and Communications Technology (ICT) components.

The OECD conclusion: The Internet is a ubiquitous economic infrastructure, but measuring the size of the Internet economy is not straightforward. Moreover, the measurement of the economic impact of the Internet as an ecosystem depends largely on the approach taken.

As an example, results of studies that assess the dynamic impact of the Internet provide a useful tool to calculate the current net value of GDP that was generated “thanks to the Internet.” As a case in point, they used the findings of a 2009 study to simulate the impact on the U.S. economy (see Figure 6).


The Essential Role of Internet Infrastructure

At the 2008 Seoul Declaration, OECD ministers shared a vision of a global information society which connects billions of people, machines and objects. In a July 2013 update report, researchers provided their current assessment of the internet’s expanding role in economic development planning activities.

“High speed fixed and mobile networks are the enablers for accessing and transferring data across the different parts and stakeholders of the Internet economy. They are the Internet economy’s backbone, on top of which digital content is created and distributed across the economy. Furthermore, they support the operation of ‘smart’ applications based on the collection, transportation, processing and analysis of data flows, some that are increasingly produced by sensors, sensor networks and machine-to-machine (M2M) communication.”

What are the implications? The Internet as we know it may have already reached an important new crossroads – just like one of numerous others that have contributed to the ongoing globalization phenomenon that we’ve witnessed over the last two decades.

Think globally, act locally, has become a mantra for the worldliest economists. Practically speaking, broadband service providers now need to translate their strategic foresight into wise investment strategies that stand the tests of time – keeping in mind the requirement for operational agility.

Preparing for the Internet of Everything

If you’re a broadband service provider, how do you scale for the exponential growth demands that the billions of existing and new internet users are placing upon today’s network infrastructure? How do you ensure that the network adapts to both the established and emerging needs for connectivity – just-in-time?

The answer: you try to foresee all the potential application scenarios, and therefore you must embrace the notion of an Internet of Everything. Here’s a case in point; this week, we estimate there will be more than 26 million new programmable devices added to the Internet.  Just imagine that for a moment.

The next wave of dramatic Internet growth will come through the confluence of people, process, data, and things — that’s the Internet of Everything (IoE). Cisco estimates that 99.4 percent of physical objects in the world are still unconnected. With about 10 billion of the 1.5 trillion things currently connected globally, there is vast potential to connect the unconnected via the Internet of Everything.

The economic incentive is unprecedented. As Cisco previously stated, there’s about $14.4 trillion of value at stake for companies and industries over the next 10 years. Put simply, we believe that preparing for IoE is not a question of if, but of when.

Yesterday, during a prescient acknowledgment that creating a viable framework for the next generation internet would become a pressing need, service providers were introduced to the Cisco Network Convergence System (NCS).

Architecture Designed for All the Possibilities

Back when I started my career in this industry, more than 30 years ago, the meaning of “technology architecture” was essentially the same – but the significance was not as important as it is today.

Networks were built for carrying voice, data or video traffic – it was the exclusive realm of engineers. During the two decades that I worked for or with service providers, I didn’t consider Economists as a primary stakeholder. But I do now. And, clearly I’m not alone.

Listen to Mike Wright, Director of Networks at Telstra, discuss the need for superior quality network infrastructure that can scale – while also building intellect into the core of the network. This is the new normal — where technology and economics are more intertwined.

On behalf of all my friends and associates that work as network architects, I want to congratulate the Cisco development team that worked on these latest accomplishments. Also, I want to recognize the team that gave me an appreciation for predictive analytics – they’re the folks who deliver the Visual Networking Index and Global Cloud Index each year.

If you have time, join the webcast tomorrow, where Surya Panditi will discuss the market trends.  While he describes the current environment and adds color to this scenario, just imagine the possibilities.

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  1. The Summit on the Global Agenda is the world’s largest brainstorming event, bringing together the most relevant thought leaders of the World Economic Forum’s Network of Global Agenda Councils. More details >>

  2. As I mentioned, others are already seeing the broader socioeconomic implications of updating our infrastructure -- in anticipation of the IoE. It's also interesting how we're using the word 'fabric' in a similar context. Michael Mandel, chief economic strategist at The Progressive Policy Institute made the following observation. “Rather than being fueled by consumption and borrowing, the Internet of Everything will lead to an economy built on production and investment, with much more extensive education and training built right into the fabric of the economy rather than being separated out.” He's quoted sharing other thought-provoking insights within a recent editorial on VentureBeat