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Summary:

It’s likely that the FCC will take a close look at the peering issue, and it will begin that process as part of its review of the Comcast purchase of Time Warner Cable.

Tom Wheeler Core Capital
photo: Core Capital

Early next week Comcast file an application with the FCC for a formal review of the proposed Time Warner Cable transaction. And once that happens, the Federal Communications Commission will have an excellent opportunity to get some of the data it will need to decide if it should regulate interconnection agreements between last-mile ISPs such as Comcast and other companies selling bandwidth or content over IP.

This isn’t about content, it’s about access

This issue has become more prominent in recent months as users have complained about their Netflix or online video streams buffering or cutting out during prime time. The problem appears to be congestion between online video providers like Netflix and bandwidth providers like Comcast that causes packets to drop and the end user experience to degrade.

Are last-mile ISPs letting this degradation happen as a way of hobbling online video competition from vendors like Netflix or Amazon or as a way to make extra money by charging companies to get access to the end consumer over their networks? Or are they simply overwhelmed by the traffic and neither side can agree on a fair way to pay for interconnections?

Basically, are last-mile ISPs acting as rent-seeking opportunists because they can or is this a legitimate business fight over who pays for the interconnections between networks? To decide the FCC will need data on both the actual congestion at these interconnection points and on the pricing that ISPs are charging.

Level 3 data that illustrates port congestion.

Level 3 data that illustrates port congestion.

And the sense in Washington, as articulated by Public Knowledge SVP Harold Feld, is that the Comcast acquisition of Time Warner Cable is the right venue to force access to this data and start this debate.

So even as Netflix and Level 3 confuse the issue, equating it with paying for better access, the FCC is going to stand its ground and look at peering as an interconnection issue. That is part of FCC Chairman Tom Wheeler’s beloved network compact that is governing how he’s thinking about moving from the analog to the IP age in communications. And the logical place to start this review will be as part of the Comcast-Time Warner merger review.

I hope the transition team associated with the merger compels information on performance at the interconnection points, but also the prices paid for direct peering with Comcast. And as someone whose broadband slows to a trickle about two-thirds of the time when I’m trying to watch TV from a Netflix or Amazon during prime time, I really hope the agency’s scrutiny or eventual action causing things to improve.

  1. It’s s bit of a leap to presume that Public Knowledge articulated Washington’s point of view on policy issues. I see them as an outlier with an unhealthy commitment to preventing rapid change in markets for technology-based services. PK is on record complaining about the fact that Verizon’s stopgap system in Fire Island rendered fax machines inoperable, but for most people fax has been irrelevant for the greater part of a decade.

    The FCC has just learned that there’s something called “peering” in the Internet space, and in typical bureaucratic fashion they want to believe it’s just like some feature of the telephone network. It that PoV holds, then their regulations about inter-carrier compensation are sure to follow, and that means ICC arbitrage is sure to follow as well.

    The first step for the FCC in regulating peering is sure to be a series of workshops to educate the TAC, because its academic-heavy membership isn’t at all clear about the commercial agreements that make the Internet work. Workshops will enable the FCC to learn the correct vocabulary for translating 19th century telecom law into 21st century-sounding regulations.

    This process may not produce the results that genuine public interest-minded people would like to see, however,. Expect it to tilt toward institutional self-preservation and full employment for telecom lawyers.

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  2. 33M Netflix subscribers * $50/mth cable internet fee = $19.8 billion/yr. Somehow I think the ISPs have enough money to pay for upgrades. Did I mention that Comcast’s most profitable offering is Internet service with a 90% profit margin? Both Verizon and Comcast make so much money they could acquire Netflix without even blinking. Verizon just paid $130B to buy part of Vodaphone.

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  3. This article is about Comcast-TWC, but those graphs are Level 3 and ISP X. Are you implying that ISP X is TWC or Comcast?

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  4. Is Level 3 also a “rent-seeking opportunists”

    http://www.prnewswire.com/news-releases/level-3-issues-statement-concerning-internet-peering-and-cogent-communications-55014572.html

    “We determined that the agreement that we had with Cogent was not equitable to Level 3. There are a number of factors that determine whether a peering relationship is mutually beneficial. For example, Cogent was sending far more traffic to the Level 3 network than Level 3 was sending to Cogent’s network. It is important to keep in mind that traffic received by Level 3 in a peering relationship must be moved across Level 3’s network at considerable expense. Simply put, this means that, without paying, Cogent was using far more of Level 3’s network, far more of the time, than the reverse. Following our review, we decided that it was unfair for us to be subsidizing Cogent’s business.”

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