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Summary:

As one might expect, Level 3 isn’t happy about paid peering and the power that ISPs have in the negotiating process. So it wants the FCC to make it a net neutrality issue.

net-neutrality-scales

This story was updated throughout to reflect new information provided by Level 3.

Level 3 Communications, one of the companies that provides middle mile broadband transit between content providers and last-mile ISPs, has weighed in on the peering fight that occurred last month between Comcast and Netflix (without actually mentioning the deal). As you might expect, Level 3, which will now deliver fewer of Netflix’s bits to Comcast, is not a fan of how much power ISPs have in paid peering negotiations. And it wants the Federal Communications Commission to help.

In a blog posted Tuesday, Level 3 took offered a coherent argument detailing the problems associated with some paid peering deals, and then confused the issue by conflating paid peering with network neutrality. It did this because the company wants to make peering fights a net neutrality issue. In a conversation with Michael Mooney, general counsel, regulatory policy at Level 3 Communications, he said “I do think the FCC can do something about this if it wants to.”

After explaining paid peering and detailing how ISPs are trying to charge content providers for direct peering as a means get money for capacity upgrades, the blog post delves into the problems associated with these arrangements:

So what if content providers refuse to pay? Some ISPs agree to augment capacity on reasonable terms. But other ISPs try to strong arm the content providers into paying by playing a game of “chicken” with the Internet. These ISPs break the Internet by refusing to increase the size of their networks unless their tolls are paid. These ISPs are placing a bet that because content providers have no other way to get their content to the ISPs subscribers, that they will cave in and start paying them.

This is exactly my concerns with paid peering arrangements given the lack of competition at the last mile and the opacity of the peering agreements. Add to this the fact that consumers are the ones that lose in these fights as their network connections stutter. They get messages like the one below.

colbert

But we have been through this. The fight between Comcast and Netflix that hurt consumers, and ended with Netflix paying Comcast for a direct interconnection to its network, is not a network neutrality issue.

The FCC did not cover peering disagreements in its Open Internet Order, which set the rules for network neutrality and was partially struck down by the courts. And Mooney thinks that was a mistake, that the current FCC Chairman might be willing to rectify. Chairman Tom Wheeler is certainly aware of the issue and has said he’s concerned about unfair practices halting innovation and access to networks, but it’s not clear if he’d enshrine that into new network neutrality regulations.

We can argue that because Comcast has a conflict of interest and monopoly access to its subscribers, the deal it struck with Netflix could become problematic if it charged crazy prices for that direct interconnection. But it doesn’t look like it did. While, the terms of the deal are a closely guarded secret, my sources in the industry don’t see any predatory pricing, claiming that Netflix got a good deal commensurate with its size and market power.

And I’m not convinced that the solution to the problem of predatory pricing for access to the network isn’t trying to convince an FCC that seems reluctant to implement any sort of stringent network neutrality protections to broaden the scope of the rules, but in transparency around the terms of these deals. Given that the internet has been governed by peering agreements (paid or not) for decades, lets not change that before we know if there’s a problem.

Mooney says Level 3 will submit a plan for FCC action on paid peering on Friday, and I hope it makes provisions for transparency so we can track if ISPs are abusing their market power and so consumers can understand what might be causing their network performance issues. So while network peering and interconnection fights aren’t a network neutrality issue today, maybe Level 3 can convince the FCC to make it one.

  1. I hate to say I told you so but: http://gigaom.com/2009/11/22/how-video-is-changing-the-internet/

    OK, I’m happy to say it.

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  2. David Burstein Tuesday, March 18, 2014

    Stacey

    I think you have this wrong, and charging at the edge is a clear violation of neutrality when the ISP is also selling video. Tom Tauke of Verizon and Jim Cicconi of AT&T accepted that in ~2007 responding to my question on the subject. To me renaming things to “paid peering” is just obfuscation.

    But neither my nor your opinion is definitive here. So I’ve reached out to the folks who coined the term, Tim Wu and Larry Lessig, for an authoritative answer.

    If AT&T can charge at the edge, to me that’s exactly what Ed Whitacre meant when he said “They are not going to use my pipes.” Until consumers of an effective choice of many pipes, I believe this is a charge that ultimately hurts consumers.

    Dave Burstein

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    1. I agree with you, but this is specifically about the legal loophole as opposed to the philosophical question.

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    2. Excellent name dropping, Dave. I’m impressed.

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  3. Bob Frankston Tuesday, March 18, 2014

    This peering issue is a symptom of the deeper compatibility between the classic business model of telecommunications which is about making the pipes a profit center and the Internet which moves all the value out of the network. Neutrality isn’t the right framing — it’s about the basic concept of what the Internet is or isn’t http://rmf.vc/IPNetflixSS7.

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    1. I agree and wrote a bit about this coming transition. I think we’ve crossed over to the telco model unfortunately. http://gigaom.com/2014/02/28/verizon-ceo-lowell-mcadam-just-took-us-on-a-tour-of-the-next-generation-internet-telco-style/

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    2. If Bob’s theory is true, the edge providers should pay for all the plumbing. Don’t hold your breath.

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  4. A Ch0w, sneeze Wednesday, March 19, 2014

    How is it not a neutrality issue if Comcast charges me for a 50mbps pipe that cant stream Netflix at 3mbps?

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  5. Michael Klurfeld Wednesday, March 19, 2014

    Your article (great read as always) seems to lead to an obvious question: should peering be a net neutrality issue?

    Having only given the issue a few minutes of thought, it seems like the answer must depend on the health and competition of the market, though I’m not sure where that leads us.

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  6. Here’s the real issue. The ISPs are not peers of the tier-1’s, they are customers. Tier 1’s sell bandwidth to content owners on one side, and on the other side, to ISPs who sell bandwidth to individuals. That is the relationship they had for years, but the ISPs have come to realize that they have the most valuable commodity on the internet – customers. The large ISPs are withholding access to customers in order to extort content providers and strong arm the tier-1s.

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