NNSquad - Network Neutrality Squad
[ NNSquad ] Re: Electrical Analogy for Peak-Demand Pricing
There are enormous public policy issues at hand that the ISP world
(mostly) has thus far avoided. Electricity, on the other hand, has
typically been regulated, even when a "market" system exists (instead
of a regulated monopoly) - it's a longer discussion as to why those
terms need a lot of clarification in the power world.
Just as one example, one has to consider that most end use providers
(the distribution retailers) buy power from "outsiders." This might be
a fallout of market de-integration ("deregulation") or simply the fact
that very few retail utilities own sufficient generation capacity to
meet all their need. It's inefficient to not run a power system in a
pool - giving and taking power as required [which, of course, comes to
a real bottleneck in the US - the transmission system]. Of the power
purchased, there is a mix of spot purchases ("market" - mainly with
mark to market rules) and bilateral contracts that are often
multi-year. In the end, there are independent system operators (ISOs)
[or RTOs - regional transmission organizations] who do the system
balancing.
The level of "scarcity" in a power grid (in the US and developed
regions) is often as little as 5%-10%, or even lower. Even in a place
like India it is 30% at worst. So, we don't enormous reductions of
load (esp. in the US) - and now say only a few percent of users choose
to participate in load management schemes (maybe through demand
response payments). The catch is now EVERYONE benefits as not only is
the catastrophe avoided, but everyone's prices go down. There is
still ongoing research on how to manage the public good and welfare
transfers, else we could end up with a lot of free-rider effects (or
worse - gaming the system).
We shouldn't underestimate the challenges in the power world which
lacks a Moore's Law or Gilder's Law - sustainability makes energy
costs go up - even something like solar power has only shown a
learning curve of 17% per annum or so. Bits on the other hand are
getting cheaper to deploy. And, as Bob points out, they are often
scarce only because of a particular design. I'm not claiming there is
no challenge in paying for bits - my concerns are the balance of
fairness and incentives.
Rahul
On Sun, May 9, 2010 at 10:30 PM, Bob Frankston
<Bob19-0501@bobf.frankston.com> wrote:
> Rahul makes a number of points that challenge the meaning of peak or
> congestion pricing. To expand on the theme …
>
> Once again we’re prisoners of our metaphors and our tendency to accept
> Malthusian scarcity. And, yes, let’s not confuse bits an electrons. Both are
> fungible but in different ways. With bits I may want my own information but
> I don’t care if they are wired or wireless or copper or fiber or red/green
> or yellow/black.
>
> I’m reminded of a meeting at which the topic was how to share the scarce
> capacity of the access points because people couldn’t get addresses
> assigned. I simply walked done the hall and got another access point to add
> capacity. Or another meeting at which there was a kiosk with terminals but
> no Wi-Fi. I asked the provider’s engineer and he immediately added an access
> point even though C&W had officially said that the they had used the last
> DSL line for the kiosk as if that exhausted the capacity. The C&W talk was a
> lament about how people weren’t willing to pay a scarcity-based price for
> their abundant bits.
>
> As with the modem crisis of the ‘90s – the claims are real if you accept the
> problem as presented. Why do we accept the providers’ business model and
> architecture as unchangeable givens? A phone companies circuit-based
> thinking creates scarcity by partitioning capacity into rivulets.
>
> This is why I keep getting back to local ownership of our own facilities. I
> remember Nynex (or whatever it was called) trying to sell me a 2400bps
> office LAN in the early 1980’s because that was their world. Fortunately I’d
> already run Ethernet cables around the office by then.
>
> What is the capacity latent in today’s physical infrastructure? What if we
> used new technologies and treated it as a common medium?
>
> I want to be very careful to explain why I use DSL as an example. It’s not
> because copper is best but because it is a simple and real example. DSL
> stuck in the 1980’s because the carriers have little incentive to improve
> it. What if tracked other improvements like Ethernet going form 10 to 1000
> bps for campus networks during that period. What if we treated wire bundles
> as a whole instead of limiting me to a single pair capped at 12000.00 feet?
> For coax/fiber what if we used IP instead of reserving the bulk of the
> capacity for faux-broadcast?
>
> Where are these constrictions? It’s as if I was told that I couldn’t leave
> my driveway to go to the corner store because there was a traffic jam
> downtown.
>
> Our time is better spent challenge the plaints about scarcity. After all
> where else in computing and connectivity have we failed to track Moore’s law
> or exceed it?
>
>
>
> -----Original Message-----
> From: nnsquad-bounces+nnsquad=bobf.frankston.com@nnsquad.org
> [mailto:nnsquad-bounces+nnsquad=bobf.frankston.com@nnsquad.org] On Behalf Of
> Rahul Tongia
> Sent: Sunday, May 09, 2010 09:58
> To: Rollie Cole
> Cc: nnsquad@nnsquad.org
> Subject: [ NNSquad ] Re: Electrical Analogy for Peak-Demand Pricing
>
>
>
> Rollie,
>
>
>
> I do a lot of work on power systems (and smart grids).
>
>
>
> A few points worth mentioning (in no particular order):
>
>
>
> 1) The marginal cost of electricity is quite non-trivial, unlike bits.
>
> 2) Electricity cannot easily be stored in scale. Bits can be delayed
>
> and/or retransmitted, within reason (based on the app)
>
> 3) The fungibility of electrons (electricity) is infinitely higher
>
> than bits - I only want to receive MY bits, which implies it is both a
>
> first mile and a last mile issue.
>
> 4) With electricity, reducing anyone's consumption, anywhere, helps
>
> the overall system. It is not as often the "last mile" (e.g.,
>
> distribution transformer) is the bottleneck.
>
> 5) The actual uptake of off-peak or variable tariffs is quite low,
>
> usually limited to larger consumers or specialized programs by
>
> selected utilities. There are actually 2 types of pricings we might
>
> think of. First, what you write about, "interruptible" or
>
> "degradable" service (usage caps). The second is actually varying the
>
> tariff to incentive appropriate behavior, either through Time of Use
>
> or, (proposed) real-time pricing. We then come to more nuances, in
>
> terms of periodicity of tariff updates, and separation of Economic
>
> pricing and "critical" control pricing - the expectation is the former
>
> should suffice 99.x% of the time.
>
> 6) With electricity, the main bottleneck to doing more is lack of
>
> information, and hence the push towards smart meters as a step towards
>
> a Smart Grid. With the net, measurements are actually a little
>
> easier, BUT, I claim, we are not measuring based on true *marginal*
>
> scarcity (or at least that is hard to tell for outsiders. Marginal
>
> means both location and time.
>
>
>
> So, to summarize how I see this - very small degradations or tweaks at
>
> a very local level (wherever any bottleneck may be) for a short
>
> duration should fix the majority of problems. Of course, if the ISP
>
> builds for 1-2 Mbps usage, and people expect to download HD video
>
> regularly, then it might choke. The harder Qs with this are (1) what
>
> is the overhead and transaction costs; (2) To what extent should (or
>
> should not) application awareness and integration play a role?
>
>
>
> I am writing this sitting in India, where "peak" electricity is not
>
> met through (expensive) peaking units - it is met via load-shedding.
>
>
>
> Rahul
>
>
>
> On Sat, May 8, 2010 at 9:56 PM, Rollie Cole <rolliecole@gmail.com> wrote:
>
>> In addition to all the proposed new schemes for "time-of-day" pricing and
>
>> the like, we do have actual experience with "peak-shaving" pricing in the
>
>> electricity world. Large industrial firms that explicitly promise to allow
>
>> themselves to be "browned out" (service cut back) in peak demand periods
>> get
>
>> a lower rate. I get a lower rate because I allowed my electrical provider
>> to
>
>> install and operate a device that will cut back my air conditioning during
>
>> peak demand periods.
>
>>
>
>> So one could imagine a rough analogy to static and dynamic IP addresses.
>
>> Perhaps, as with IP addresses, the default is a the "brown-out" rate
>
>> (throttled when and if the network is congested). The difference I would
>
>> urge is that the details be as spelled out in advance as feasible, so
>
>> end-users could begin to adopt use patterns that would help reduce
>> instances
>
>> of congestion -- ie, do heavy downloading or uploading at unusual times,
>
>> etc.
>
>>
>
>> Those who wanted the standard "consumer electrical" deal (i.e., "best
>> effort
>
>> at all times, regardless of peak") could get it, just as those who need a
>
>> static IP can do so.
>
>> --
>
>> Rollie Cole
>
>> 5315 Washington Blvd
>
>> Indianapolis, IN 46220-3062
>
>> 317-727-8940
>
>>