Paid peering is not a net neutrality issue but Level 3 wants to make it one

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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.

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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.

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