December 8, 1997

Will Commerce Flourish Where Rivers of Wire Converge?


Three years ago, Brian Reid came away from a tour of California's missions with an epiphany that today is transforming this cornerstone city of Silicon Valley into the nerve center of cyberspace.

Credit: Sam Morris for The New York Times

Brian Reid, right, a computer scientist with Digital, and Al Avery, general manager of the Internet Exchange, stand in front of the distribution room, which can deliver 20 gigabytes a second of Internet bandwith.

Reid, a computer scientist with Digital Equipment Corp., had done pioneering work in the 1970s on the Arpanet, the computer network that would evolve into the Internet.

While playing tourist with his fourth-grade daughter in 1994, he realized that each mission he had visited represented an experiment in urban planning; those that combined the right economic, geographic and social factors eventually blossomed into cities.

Just as centers of commerce sprang up along navigable rivers, around natural harbors and parallel to railroad tracks and major roads in earlier centuries, Reid came to believe that the commercial hubs of the next millennium would take root around pipelines that carry torrents of computer data.

"Bandwidth is the delivery vehicle by which these companies sell their goods in the information age," Reid said last week. "Bandwidth in the late 1990s is important for commerce in the same way that railroads were important in the 1890s and seaports were in the 1790s. It's the way you sell your product."

As applied to the Internet, bandwidth is a measure of how much data can flow between any two computers at any given moment. The Internet can be seen as a system of larger-to-smaller pipes or the branches of a plant's roots.

The closer your computer is to the Internet backbone - that is, to the fattest pipes or roots in the system - the more data you can send and receive in any given second. And data, whether encoding streams of video or customers' orders, are the raison d'etre of the Internet.

Reid, who heads a team of network engineers at Digital, is realizing his vision in Palo Alto, where a combination of public and private investment has created the highest-capacity switching point on the Internet.

Last spring, the city of Palo Alto completed construction of a $2 million, 15-mile-long fiber optic ring that snakes beneath these suburban streets and culminates in Digital's new Internet Exchange, which the company bills as the world's biggest on-ramp to the Internet.

The combination is proving to be a powerful magnet for bandwidth-starved companies, from start-ups like WebTV Networks and ETrade Group to established businesses like the venture capital firm Accel Partners. In the process, it is transforming this city into the nation's premier Internet address.

More than 50 percent of all worldwide traffic on the Internet passes through Northern California.

"It's like being right on top of the nexus of five major railroads," said Steven Pearlman, chief executive of WebTV, the Internet television start-up that was acquired earlier this year by Microsoft Corp.

As a result, along University Avenue, Silicon Valley's version of Rodeo Drive and the commercial street that connects the city to nearby Stanford University, chic restaurants, furniture and bookstores and latte and burrito stands are bustling with engineers, programmers, venture capitalists and hackers drawn by the chance to grab a chunk of bandwidth in the land rush of the information age.

At the same time, the rapid growth of Internet commerce is supercharging the economy of Silicon Valley. Technology companies like Dell Computer and Cisco Systems - each of which expects to sell more than $1 billion of hardware on the World Wide Web in the next year - are being joined in the rush to electronic commerce by old-line companies like General Motors, which has begun selling cars and trucks on line.

And while Dell and GM are not situated in Silicon Valley, it is widely believed that the surge in online commerce worldwide increases the economic advantage for this region. Already more than 50 percent of all worldwide traffic on the Internet passes through Northern California.

"Silicon Valley's initial regional advantage is being reinforced through early and massive leading-edge investments in technological infrastructure," said Annalee Saxenian, a University of California at Berkeley professor in the department of city and regional planning. "Through this process, Silicon Valley will compound its advantage relative to competing regions, just as the manufacturing belt did in the late 19th and early 20th centuries."

Palo Alto's investment in a fiber optic infrastructure capable of connecting to Digital's Internet Exchange at blinding speed is attracting companies like Accel Partners, which relocated here in November from San Francisco, leasing a three-story building on University Avenue. Accel's executives said that the availability of high-speed Internet connections was a crucial factor in their decision to move.

"Easy access to state-of-the-art video and data played a central role in how we thought about building our new headquarters," said Jim Breyer, an Accel partner.

If They Build It . . .

With its high capacity fiber optic network, Palo Alto, Calif., hopes to attract industries that demand large amounts of Internet bandwidth, such as these.

2 megabits a second Doctors could transmit patientsí X-rays and even perform telesurgery on people in remote locations.

Video on demand:
2 megabits a second The promise of high-quality video on demand could become a reality.

Movie special effects:
45 megabits a second Many companies could do remote collaborative video editing.

Source: Envisioneering

Palo Alto's fiber-optic data and voice network comes within one mile of every home and business in the city. It will permit residents, businesses and organizations to link to the global computer network at speeds that will dwarf even today's fastest cable modems.

It will also offer far greater speeds than the fastest digital connections being planned by telephone companies. Symbolically, the ring intersects the Internet in the basement of the building that was once the local telephone company's switching office, just half a block off University Avenue, where Reid's team installed the world's most powerful private Internet exchange point.

But telephone companies are also players in Digital's exchange: four currently supply a total of 14.9 gigabits a second of data capacity - the equivalent of 193,500 simultaneous voice telephone calls. What is more, Digital's hub has enormous additional capacity: it can be expanded to support the equivalent of 87 million simultaneous calls.

The building, which was 100 percent occupied in July, just 10 months after opening, now houses the equipment for 35 Internet service providers, including @Home, WebTV Networks, Deutsche Telekom North America, Hongkong Telecom, Internet Initiative Japan and UUNET Technologies.

It is also connected to the world's longest OC-3 fiber network link to Asia, a beachhead for Japanese corporations that want to conduct Internet business in the United States. (An OC-3 cable carries 155.5 million bits a second, the equivalent of about 2,016 simultaneous phone calls.)

A primary attraction of this kind of exchange point is that it permits companies conducting sales over the Internet to put their Web servers at the spot where Internet data flows most swiftly, making them easily accessible to millions of customers.

D eutsche Telecom, the German telecommunications giant, also chose this location for its Internet services to experiment with aspects of electronic commerce precluded by heavy regulation in Europe.

Just as important, the Digital Exchange serves as a neutral meeting ground for the world's largest fiber optic communications companies.

The first Internet exchange points, known as Network Access Points, or NAPs, were established in the early 1990s, when the National Science Foundation set out to privatize the Internet. Then, in 1995, a growing traffic jam in Internet data led to the idea of a private exchange service that would bypass much of the congestion at the original NAPs.

To be sure, many of the nation's cities and private telecommunications companies are also racing to deploy fiber optic networks. In California, other ambitious fiber optic infrastructure projects are under way in Los Angeles, San Diego and Anaheim. On the East Coast, the City of Winston-Salem, N.C., will complete its own fiber network in January.

But Palo Alto, Reid said, offers a unique synergy of culture, business and technology. "If you're trying to launch a new business model, you have to do what the padres did," Reid said, alluding to the Spanish missions that inspired Digital's exchange. "This is the beginning of the infrastructure of the economy of the new millennium."

There is a tremendous commercial advantage to be gained by placing the most popular Internet services directly at the peak of the bandwidth pyramid, Reid says, since it cuts out the need to push data "upstream" to the exchange.

"Everyone wins because there is half as much traffic on the Internet," he said.

To stress-test the hub's capacity and robustness, Reid's team is using Digital's popular Alta Vista search engine as an "attractive nuisance." Unarguably the most powerful search engine on the Internet, Alta Vista handles 25 million queries a day and delivers 62 million pages to users.

Despite those levels of traffic - about 15 times the traffic for the most popular news and entertainment sites on the Web - Alta Vista has remained the fastest and most robust search engine on the Net.

But access to the Internet is not the only need that businesses have for bandwidth. High-speed intranets and local area networks also allow companies to unite workers at numerous remote sites into a single "virtual office."

Early on, Reid also approached the city of Palo Alto, asking that Digital be permitted to run fiber optic cables through city conduits to interlink its nine research laboratories in the downtown area into a single virtual office building. That model helped attract WebTV, which, since it was founded here two and a half years ago, has rapidly spread to 10 office sites in downtown Palo Alto.

The virtual office model is now viewed by economists and Silicon Valley executives as the corporate archetype of the new information economy inspired by Internet commerce.

Harry Saal, chairman of Network General, a Silicon Valley computer networking company, said, "Fiber optic networks have meant that we are able to create distributed network-like businesses without resorting to the high-rise model."

While employment of the new fiber optic infrastructure here has so far been all business, that may change soon.

"Palo Alto is undergoing a transition to an information-based economy," said Van Heimke, the city's telecommunication manager. "The early market is the commercial one, but there will be school and residential markets as well."

About 80 percent of the city's homes have personal computers, and according to PA-COMNET, a local organization pushing for higher speed Internet access for the community, Palo Alto already has the highest per-capita Internet use in the world.

On Dec. 1, Heimke's department proposed to the City Council that the city enter into negotiations with companies that are developing advanced fiber-optic consumer-oriented Internet technology with the goal of bringing an ultra-high-speed Internet connection to every business and residential address in the city. The proposal will be taken up this week.

The city government has its own reasons for wanting to wire the entire city. It is already moving some of its bureaucratic procedures, like filing building permits, to the Internet, and officials say they expect that this is only the first step.

"We set out to be the first city on the Net," said Liz Kniss, a City Council member and former mayor of Palo Alto. She also predicted that the arrival of residential fiber optic networks would fundamentally alter community life.

"The impact of the Internet has already become so apparent," she said. "The other day I was looking for a local soccer schedule. It's midnight, and who are you going to call?"

Quick News | Page One Plus | International | National/N.Y. | Business | Technology | Science | Sports | Weather | Editorial | Op-Ed | Arts | Automobiles | Books | Diversions | Job Market | Real Estate | Travel

Help/Feedback | Classifieds | Services | New York Today