Classroom Companion: Business

 
Chapter 4 · Digital Economy Ecosystem

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The rest of this chapter contains more details concerning the most important 
components of the digital ecosystem: the Internet, computer platforms, applica-
tions, consumers, and authorities.
4.3 
 The Layered Internet as Ecosystem Component
One of the most important events in the evolution of digital markets was the com-
mercialization of the World Wide Web (WWW) in 1993. Before 1993, network 
operation and service provision were integrated industries, and consumers could 
not freely choose network access independently of service. The WWW led to a 
restructuring of the ICT business in which network operation and service provi-
sion became independent industries. This was possible because of the layered tech-
nological architecture of the Internet.
.
Figure 
4.5
 shows the layered Internet model in which the Internet is divided 
into three parallel planes: networks, user equipment, and applications. The 
Applications
User
equipment
Networks
Physical link
Inter-layer
connection
Virtual
connection 
ISP
NP
DP
ASP
. Fig. 4.5 The layered Internet model. (Authors’ own figure)
4.3 · The Layered Internet as Ecosystem Component

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three planes correspond to three independent business areas: (1) networks; (2) 
the development, production, and sale of user equipment; and (3) the provision 
of services, information, system management, and remote sensing and control 
(Audestad, 
2007
).
The networks plane shows the physical communication network as a graph in 
which communication links (physical links) interconnect the routers using the 
Internet protocol (IP). This graph then symbolizes the physical network support-
ing the businesses of the network providers (NPs) and the Internet service provid-
ers (ISPs). This is, strictly speaking, what is defined as the Internet.
The user equipment plane consists of a graph in which the hosts (e.g., comput-
ers, servers, and databases) are nodes, and a connection between two hosts indi-
cates that the hosts are taking part in a common computation. This is the transport 
layer, and TCP/UDP/SCTP
1
connections exist between hosts. The user equipment 
plane is the business domain of the device providers (DPs).
The application plane is a graph in which software objects (applications) are 
nodes. A connection between two nodes (often referred to as virtual connection) 
indicates that the corresponding software objects take part in a common computa-
tion. A smartphone and downloaded apps are nodes in such a graph. This graph is 
dynamic and may alter configurations in milliseconds. This may then include com-
plex configurations such as cloud computing, software-defined networking (SDN), 
virtualization (NFV), and service-oriented architecture (SOA). The application 
plane is the business arena of the application service providers (ASPs) and the 
content providers (CPs).
Since software runs on computers and computers are connected to the Internet, 
there also exist vertical interactions (inter-layer connections) between the layers as 
shown by dotted lines. Note that the structures of the graphs on each layer are 
independent of one another except that there must be a path in the network plane 
connecting two hosts in order for a TCP/UDP/SCTP connection to exist between 
them. A TCP/UDP/SCTP link must exist between two software objects running on 
different hosts to take part in a common computation.
Note also that competition takes place between stakeholders on the same layer 
of this model. There is no competition between operators on different layers. The 
user equipment layer can then be regarded as the demarcation line between the 
business segments of the ISPs in the network plane and the ASPs in the applica-
tion plane. The important point is that the ISP cannot perceive what kind of ser-
vices is carried by the network since this is obscured by the protocol on the 
transport layer (TCP/UDP/SCTP) itself and the Transport Layer Security (TLS) 
encryption protocol in particular. This has a severe impact on pricing regimes 
available to the ISP: since the ISP cannot identify the type of service, the ISP can-
not levy differentiated charges. The ISP is then forced to apply service-independent 
1 
TCP = Transmission Control Protocol for connection-oriented data transfer, UDP = User Data-
gram Protocol for sending of uncorrelated data packets in the connectionless mode, 
SCTP = Stream Control Transmission Protocol for supporting both connection-oriented and 
connectionless services in the same data transfer session