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Broadband shouldn’t be like cable TV. Why consumers should care about peering.

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When you’re curled up on the couch, set to watch the second season of Orange is the New Black, and the video stream pixelates or just stops, it’s the modern-day equivalent of the “all circuits are busy now” message one can still hear on landline phones (or one could, if people were calling on them). And the issues behind both problems are similar — somewhere in the network there is too much demand and not enough capacity.

But unlike the days of landline phones, when one industry controlled the calling experience (telephone companies that were forced by FCC regulations to connect calls on their networks), our broadband networks and the internet itself is controlled by varied industries and there are no rules around interconnections. This is why we’re seeing Netflix and various ISPs battling it out in the press.

The internet is a wild west

A video quality report from YouTube for my ISP.
A video quality report from YouTube for my ISP.

For much of the internet’s life this wasn’t an issue, but in 2014 as video takes over more and more of network traffic (and cuts into the ISP’s triple play bundle) ISPs have been pushing back against the large content providers like Netflix, Google, Amazon and others. Where in many cases U.S. ISPs (and most participants on the internet) have signed interconnection agreements that link the two parties’ networks together without one party charging the other, this is now changing.

Seeking control over what traffic gets on their network and another source of revenue, several of the nation’s largest ISPs have been engaging in negotiations to charge Netflix, and transit providers that carry Netflix traffic for the ability to directly connect to the ISP networks. This has led to both Netflix and ISPs to engage in behavior that has hurt consumers. We’ve detailed the problem here and here, and also explained why this is an issue that the FCC should investigate.

While the FCC, the tech press and a few other entities are paying attention to peering, it’s a hard sell for consumers, since it’s happening out of sight in data centers and requires and understanding of how the internet works. Other than bad Netflix, consumers may never see the issue. And bad video streaming could be caused by any number of things — from bad Wi-Fi to a server problem at the content providers end.

Plus, it can be even harder to understand why Netflix shouldn’t pay and why that might be bad for consumers.

A tale of broadband frustration

But I have a perfect example of why this matters. It starts at my cable box. Since the beginning of the year, my husband and I have had trouble watching Amazon or Hulu during prime time over our Time Warner Cable connection. The video streams would fail and we’d get messages on our Blu-Ray player telling us our connection was too slow. Yet, a check on would reveal we were getting at least 30 Mbps not the anemic 1.2 Mbps or .3 Mbps our player would show.


TWC offered a software upgrade to our modem and was actually quite helpful with regard to sending someone out to fix the problem. While I’m well aware that any cable modem is a shared service, it’s ridiculous to think that someone paying for 50 Mbps would be content to get 1 Mbps. Time Warner agreed.

Unfortunately, the problems remained and then my modem would just drop offline for 15 minutes to as much as 2 hours. This was untenable and the cable guys came back out to eventually replace the coaxial cable on my entire street. While the problem with both intermittent service and the prime time video playback are still occurring, they have lessened. But my husband and I decided to seek an alternative to Time Warner Cable.

Show me the options

We live in Austin, which is often held up as an oasis of broadband competition with an existing gigabit network provided by Grande Communications, a soon-to-be-gigabit network from AT&T and another planned gigabit network from Google. But none of those are available in my Austin neighborhood. So our choice was TWC or AT&T’s U-verse with 24 Mbps down and 3 Mbps up.

Austin Google Fiber Launch

AT&T was cheaper, but it also is having an interconnection fight with Netflix at the moment — leading Netflix to say that AT&T’s Uverse speeds are slower than DSL. Since we watch a lot of Netflix and other internet video services (we don’t usually have cable in our house because we don’t watch much TV), AT&T would only fix one of our problems.

And what if Netflix hadn’t signed a peering agreement with AT&T, but Amazon had? What if TWC had a deal with Netflix but not Hulu? Then, here I am: a consumer who pays for the fastest broadband speeds available getting high quality access to only some of the internet. That’s not a choice consumers should make. When it comes to both peering and the network neutrality rules that the FCC is considering, ISPs are seeking to use their access to my home to charge everyone, at every point in the network, to deliver content.

This will make them the gatekeepers to content and force consumers into lose-lose situations with regard to picking a broadband provider. The internet isn’t like cable TV. We shouldn’t have to pick from two or perhaps three service providers who have the deals in place to deliver the content we want. Especially if the other alternative is to go with a provider whose service doesn’t even work all the time.

As we’ve said before, the only broadband that matters is the broadband you have access to at your home. In most places, that’s not a competitive market. And with fights over interconnection agreements and the possibility that network neutrality transforms into paying for priority access, consumers get screwed again. Take it from me. Having a bunch of bad choices is like having no choice at all.

44 Responses to “Broadband shouldn’t be like cable TV. Why consumers should care about peering.”

  1. Italy has one of the worst broadband markets in the world: low speeds, poor coverage, and a low subscription rate. Not surprisingly, Italian ISPs are unprofitable so the nation’s FTTH strategy stalled out with less than 10% deployment, about a third of the FTTH coverage rate we have in the US. Because Italy never had cable TV, it has very little locally-produced video content so Italians just ride around on Vespas from coffee shop to wine bar saying “ciao”. It’s very sad, even worse than France.

  2. Whatever

    I live in Italy, Europe.
    We don’t have Fiber to the home. At least not in my town…
    In italy there aren’t cable operators at all. Only phone companies and or ISP’s

    All the time I hear of ISP/cable operators in US… I hear about expensive plans but at least with very interesting Mbit of bandwidth….

    The I hear of the real speed.. that is pretty lame to not say worse words…..

    At home I pay less than 20$ and I’ve only 7Mbit download speed….
    But I’ve them all. I can watch youtube or a streaming service and very rarely it will halt for a few seconds for buffering reasons…..

    There had been periods that peak hours mean lower bandwidth but never got less than at least 50% of my nominal bandwith…. no matter the reason, period or time…..
    And when it happened to have lower than expected nominal speed… there was my ISP ready to confirm the issue and getting upgrades of the network apologizing if they couldn’t upgrade fast enought

    By the way…. In my area I’ve at least 4 xDSL operators that can connect me directly and at least 10 that can connect me leasing the last mile…. that means choice….

  3. “…it’s a hard sell for consumers, since it’s happening out of sight in data centers and requires and understanding of how the internet works.”

    That’s a large part of the problem in the public debate. Most people have absolutely no clue whatsoever about how it works and how data gets from the source to their computer/screen. As far as most people know, it’s just pure magic. And yet they presume to pontificate on how the business model ought to operate (or be forced to operate) despite the fact they have no idea whatsoever what is involved in making the Internet happen.

    “Any sufficiently advanced technology is indistinguishable from magic.” – Arthur C. Clarke

    One of the principles lost on people is that it takes resources, and money to deploy and maintain those resources to deliver internet service. And the higher the data rates, the greater the resources and cost required. Now, everyone gets that when you ship a package, it obviously costs more to ship a larger/heavier package. It take more fuel to ship. It takes a larger vehicle to ship. It take more maintenance to support the infrastructure. It takes more labor. It should cost more to ship a package that takes up as much space/capacity as several smaller packages. Everyone gets that because they can see and feel that one package is heavier/larger than another.

    But when it comes to “magic” – no one can see or feel higher bandwidth so there is no concept of cost associated with delivering higher bandwidth. “I can’t ‘see’ or ‘feel’ it, so why should it cost any more?”

    So, just like the person shipping the heavier/larger package ought to pay more for what is being shipped, why should not the people “shipping” massive amounts of data expect to pay more for that? And, just as with shipping physical packages, who “pays” is an open question. The purchaser or the shipper? But we know, either way, the purchaser pays. When you order something online, the seller can charge for shipping, or they can jack up their price to cover the cost of shipping. Anything they pay has to first come from the paying customer – one way or another. And Netflix “pays” the USPS for shipping DVDs. So why would it be absurd for Netflix to “pay” the ISP for shipping streaming video? If Netflix didn’t “pay” the USPS for shipping DVDs, then the customer would obviously have to pay the USPS. So if Netflix doesn’t pay the ISP why would it be so absurd that the customer would pay the ISP for “shipping” the streaming video.

    Now, sure, it may be the case that you pay for certain data rates, but that price structure is predicated on certain usage profiles. Whether or not they explicitly state that, does not change the fact. That goes to not knowing the “how it works” leading to presumptions about how it ought to be priced. Think about “unlimited” wireless data. Is it really “unlimited” No. The service providers pricing model presumes it is in fact _limited_ by the capacity of the device. There’s only so much data that can be consumed by a phone. Which is why they want to charge you for any use outside of your phone, eg. tethering/modem. On the other hand, when they charge you for an explicit data amount, usually you are free to tether – they get paid for the, data directly, they don’t how you consume it.

    But still, it all comes back to the REALITIES of providing internet service. Just because you don’t get understand it, or you think you are paying for something you are not. (eg “over-subscription” is a delivery model that has certain assumptions to offer higher data rates, but when those assumptions no longer hold, eg streaming – there is an impact that has implication in reality), that does not change the REALITIES of the technologies and business models. The realities are what they are and that you think they _ought_ to be different does not change those realities. No does ignorance of those realities make them not realities.

    I have worked in the networking industry for many years so I know a thing or two about how the Internet works and what it takes to make it happen. Just saying.

    • To add to your point, a “receiver pays” model would not work because end consumers have very little visibility or control over what they actually receive. The consumer may decide what site to visit, but the site decides what data to deliver and how well it is compressed. The “sender pays” model helps insure that content providers deliver only what users want, as efficiently as possible. Imagine getting bombarded with high bandwidth video ads, that you had to pay for.

  4. It’s unrealistic to try to model the overall behavior of the entire Internet on the basis of one company that manages to consume a third of its total bandwidth. If there is a “special case” in the Internet ecosystem today, its name is Netflix.

    It’s arguable that Netflix isn’t even a proper part of the Internet anyhow. If you look at how it distributes its content, it looks a lot more like a video on demand service that supplements cable and satellite TV than a general purpose Internet service like eBay, Amazon shopping, or the New York Times.

    In any case, Netflix is so large – 40 million+ customers – and so successful that its fate has nothing to do with that of the typical startup. It’s also simply a middleman, and even if it went out of business today, 99.99% of the content it serves would still be available from other sources.

    Netflix has a history of misbehavior, so it’s a poor poster-child for the Open Internet cause. Before building Open Connect, it switched CDNs every six months, totally disrupting all the provisioning and capacity planning the ISPs have to do to handle the enormous volume it presents. It’s more or less the Manny Machado of VoD, throwing bats at other players because it’s not getting the special treatment it thinks it deserves.

  5. Norman

    Netflix and other providers should pay to connect to the internet, just as I do to receive from the internet. Our costs should be based on the speed and amount of traffic we want. The more content Netflix and other content providers send to the internet, the higher the charge. I could want fast speed but only 1/10 the traffic as someone else. The person with higher traffic should pay more than I would with lower traffic, even though the speed at which we receive is the same. ISPs should not charge content providers for a fast lane, unless the ISP is providing a direct interconnection to their customers, thereby Netflix can bypass the Internet connection and lower Netflix costs for direct Internet access they may need for other ISPs.

    In other words, the interconnection would not allow Netflix to stream through Verizon or others to the Internet, only to their customers. Netflix has to pay for interconnection somewhere.

    If I the customer am calling for more traffic through my ISP, then the ISP needs to provide more bandwidth, perhaps charging we the customers more. The content providers need to be charged at the point of connection to the Internet, not with the ISPs, unless as I stated above the ISP is providing the interconnection to the Internet and not just to their customers. Netflix is not creating the problem directly for the ISPs, it is the ISP customers creating the problem by wanting access to the Internet traffic of Netflix and others.

  6. SamH.

    Are there implications for this outside of not being able to watch one’s favorite TV shows or movies? Is it about more than entertainment? Because if it’s not, I have a hard caring one way or the other. Now if the congestion gets to bad that people can’t use the internet for basic communication, distance learning, telehealth, web searches, etc. then there’s a problem, but it’s hard to get worked up over TeeVee shows.

    • Great point. When people get on the Net Neutrality high horse, they like to talk about the truly innovative applications that Internet has enabled, like the ones you mention. But, the reality is that it is long form video–TV on the Internet– that is hurting the performance of those applications. Basically, the early adopters of Internet TV got a free ride on the infrastructure investment stimulated by all of the truly new things you could do with the Internet. Now that excess capacity has been used up, the economics are adjusting to fund the next wave of capacity upgrades by the actual users of it, and they don’t want to pay.

  7. Gary Ross

    Here’s my two cents worth. I think many comments think that corporations will do the right thing. That thought is totally ludicrous and has been proven wrong in almost every situation. Corporations are interested in share holder profit. Their product gets them the ROI but the incentive to do things that benefit the customer or end user the most do not. Therefore, expecting greedy CEO’s to do the right thing is stupid. They will do so ONLY if it increases their bonuses.

    Also, I think that lawmakers should be required to wear labels of their corporate contributors just like NASCAR drivers wear their corporate sponsors on their cars and uniforms. I can’t even begin to believe that there are still people out there that think politicians will do the right thing. They won’t as long as money is allowed to influence politics.

  8. Drengor

    Perhaps you should answer the question why someone like Netflix, who is producing 30% of the traffic on the internet isn’t paying anything approaching even 3% of the bill…

    • Skippy

      Maybe because it is not Netflix producing 30% of the traffic. It is the ISP’s subscribers (the one that pay them for internet) producing 30% of the traffic from Netflix.

      If nobody requested traffic from Netflix, then Netflix would produce exactly 0% of the traffic. However, the ISP’s subscribers are requesting the traffic and it is the ISPs that are responsible for maintaining their network to an adequate level to fulfill the request of their own consumers that are paying them to do just that. Where those bits come from and what they contain is irrelevant.

      If the ISPs are not satisfied with the amount of traffic that their own paying subscribers are putting on their network then they should either limit the bandwidth of their subscribers by selling slower speeds or raise their rates to reduce the # of subscribers thus lessening the load on their network.

      • Only the sender can truly control the volume of data injected into the network. That’s why the Internet has always been based on sender pays, just like every other shipping services. If you have a beef, it is with what your ISP is charging you, not what they are charging Netflix.

  9. Of course the ISPs should not prioritize traffic but until we have more competition I fear this will only get worse.

    In the meantime there may be a positive side to all of this…which is it may help us watch less TV and finding some new hobby or get some more exercise!

  10. Rickey

    The ISP’s do not want to keep up with technology. They do not want to invest the money it takes to keep up with the demand, so they are starting to complain. If they can not handle the speed demand, they need to get out of the business and give up the monopoly that each have in the area they are doing business

  11. John Engle

    As long as business continues to focus on just how much profit they can suck out of people, I don’t see why anyone should subscribe to any service. True, business is there to make money. But what about the service? What about the customer service? What about providing a great product for a REASONABLE cost to everyone? The main problem with just about all business is that they think the monthly bill for their service is the only bill people have to pay. People have other bills which are a lot more important. Rent, food, utilities, gasoline, car insurance. These bills are must haves. You need them in order to live. Cable/satellite tv or internet service are luxuries. They are not must haves. And this is where the majority of common people make the mistake because they view these services as must haves. They are not. Still, I remember a time when you used to walk into a store or business, speak with an intelligent person with a lot of product knowledge, get all of your questions answered, pay for the first month of service and leave feeling good about what you just did. Not like that anymore. Now you call a 1-800 number for support and pray that the person who answers speaks enough English to not only understand what you are saying, but also they speak enough so you can understand them as well. Business as a whole has gone down the toilet years ago. Providers of service and products just keep raising their prices and give you less and less and they want you to be happy about it. I quit cable service about 15 years ago and have never looked back. I quit paid internet service service about 9 years ago. I have built my own equipment and got a hold of some killer software. I can now have an internet connection anywhere I go. I can also watch pretty much whatever I want as well online. And the best part is that I don’t pay a dime for it. I have given enough of my money to these leeches over the years. No more.

    • There was a time where electricity was a luxury as well. You didn’t need it to live.

      Now it is considered a necessity and rightly so. We need electricity in our homes to function normally in society.

      Where cable is a luxury, I’m beginning to consider the internet as being closer to a necessity to function normally in society. Look at all of the cord cutters? I cut the cord on cable about a year ago, but I’m still using internet. I would bet that almost all of the “cord cutters” are still paying for internet. The internet is what helps them cut the cord in the first place because it is more affordable to access OTA television, netflix, hulu, etc.

      This in itself doesn’t make internet a necessity, but I use the internet to pay my bills, maintain my accounts, contact customer support, communicate with people far away, communicate with my employer and colleagues, research and learn new things (DIY) that save me lots of money, etc. I’m seeing internet as more of a necessity than not.

  12. Matt W

    Netflix wants a free internet connection…. Umm so do I. Most Fortune 500 companies that are not ISPs, like Netflix’s pay millions for all of the connections they need to the internet. Why would Netflix think they are different? They are not an ISP, therefor peering does not apply. Net flux i complaining that they were getting it for free and now have to pay?

    I’m complaining that they ever received internet for free.

    • Theyre already paying Cogent to deliver their data. Cogent and other ISPs have a peering agreement. Bottleneck is between the ISPs. Last mile ISPs wants to charge Netflix for them to upgrade their network since they cant handle the data being passed to them by Cogent supposedly.

      • Drengor

        You hit the nail on the head. Netflix is only paying Cogent (before this recent deal with Comcast). None of that money flows to other networks. Peering is based on nearly equivalent traffic going both ways. Now that Netflix is on Cogent, that is broken, and flooding most of Cogent’s peering points.

        Cogent (the absolute worst ISP for peering disputes) is the last (major) ISP on the planet that should be sourcing 30% of the internet’s traffic. Before this last hoopla with Netflix, nearly 80% of the peering disputes involved Cogent. Their CEO has admitted it in interviews…

        “We have had more peering disputes than anyone,” Schaeffer admits.

    • Skippy

      Where in the world do you people come up with this?

      You clearly have no clue. Netflix pays lots for their internet connection(s) and they have never sought to have it for free.

      Netflix also offers ISPs to be a part of their OpenConnect program at not cost to them which has great benefits to them AND to the ISPs that are a part of it. It is amazing that only the big ISPs that dominate the markets are the only ones that don’t want to be a part of it. Why? Because they have the subscriber base large that i enough they can use to extort more money out of Netflix like Comcast did.

  13. Hikari

    In the late 1990s, the deregulation of the California utilities—which forced them to sell off their power supplies to independent electricity wholesalers—proved to be a disaster. The magic hand of the market was supposed to bring down energy fees for all. What happened instead was that “efficient markets” turned out to be nothing of the sort. In 2000, market manipulation, artificial scarcity created by shutting down power plants to reduce supply, and deliberately inferior service resulted in blackouts and brownouts, an 800 percent rise in energy prices, and lucrative profiteering by Enron. Southern California Edison and Pacific Gas and Electric went bankrupt, and the whole crisis cost somewhere upward of $40 billion.

    Electricity wholesalers such as Enron are akin to Internet service providers such as Time Warner and Comcast in important ways. The electricity wholesalers had incentives to starve the energy market in order to extract greater fees from utilities and consumers. ISPs have similar incentives to manipulate their bandwidth in order to extract fees from websites (such as Netflix and YouTube), as well as not build out any infrastructure that would make bandwidth cheaper or make your Internet faster.

  14. Steve in Boulder

    Good luck figuring this out Stacey. We’ll all be interested in hearing where you go next along with the pros and cons you encounter. I expect many of us will experience this journey in the future.

  15. Mcbeese

    It doesn’t make sense to me that TWC would need to replace the lines on your street if your Internet speeds are fine but your content speeds are not. That is clearly a network problem, not a coax cable problem.

    The double-dipping that the ISPs are trying to get away with is criminal. Our elected representatives don’t understand technology and don’t seem to be able to grasp the implication of fast lanes and slow lanes. We need to express the issue in terms they understand. $$$.

    I pay my ISP a fee to deliver bits from Internet addresses that I access, including Netflix. We have a contractual agreement. My ISP is now going to charge Netflix for the same bits. The exact same bits that I have already paid them to deliver to me. Bottom line: The ISP has just doubled it’s prices. Netflix will ultimately pass these costs on to the consumer, so this move is a huge price increase for the consumer. The regulators need to understand it in these terms. Prices have just been doubled.

    • Alex Bergo

      Telecoms are already getting away with it in the US over the phone bills. Their so called minutes are charged on both sides.
      But you are right this is primarily because technology has outpaced policymakers.

    • Drengor

      You completely missed the peering point. Your access is fine. Netflix is producing 30% of the internet’s traffic, and sourcing most of it from one point on the internet. That point is now dumping far more traffic through the choke point that is that network (Cogent)’s connection to other ISPs (Comcast, Verizon, ATT, etc.).

      The connection points between networks (peering points) are always the slowest parts of the internet. To make matters worse, networks that approach capacity degrade badly. Packets get dropped either due to congestion, or errors.

      Netflix has offered to let ISPs host redundant servers for free… of course, ISPs are in the busness of being paid to host servers… and aren’t very receptive to doing it for free.

      There is no reason that Netflix, generating 30% of the internet’s traffic, should not be paying a significant percentage of the bill. I’d be surprised if they were paying 1 thousandth of 1% of the internet’s bill.

      • Ralph Spooner

        Drengor, you have hit the nail on the head. Even someone with no understanding of how IP traffic works should be able to understand your explanation. Well done. In my mind, their best option would be to put their own hosting servers in the largest metro areas of each state, then build connections to the ISP hubs of each ISP in that area of the state. They could then build dedicated backup routes between each of their own servers. What these companies like Hulu and NetFlix are looking for is priority traffic designation over limited capacity routes and we both know that isn’t going to happen. That would be the fastest way I know for an ISP to lose customers that just want to surf the internet in general, job searching or kids doing homework research. In my local hometown, when the local cable provider started offering cable modems and ISP service, one neighborhood kept complaining about slow service. It turned out that one particular house and IP address was uploading and downloading gigabits of data every day and most of it between 5 pm and 9 pm. The person was running an architectural and engineering design company from his home. He didn’t want to pay for the business class service and therefore bogged everyone else down on the line. When the cable company discovered what was going on, they shut him down until he upgraded to business class service and the city charged him for running an unlicensed business.

    • Peter

      You shouldn’t have to pay more to get access to your IP addresses. But TW, ATT, Comcast etc, built the fast lanes. They invested billions of dollars so that you can watch programming from your TV, your phone, your tablet etc. When one company (Netflix) is so popular that it squeezes the internet so much that is slows down other peoples feeds, than it can pony up cash on the other end to compensate Comcast for the overhead costs associated.

    • chebitown

      If I host an email service in my computer and some use it, should my ISP stop billing me because the bits were already paid by the guy using my service?
      If Netflix is connected to an ISP, Netflix becomes customer os such ISP. Why is no gonna pay for it?

  16. So, I’ve read several of your articles. Other than complaining and b… and moaning, I haven’t seen a single solution offered. What’s your point?!?!

    • The solution, at a minimum for peering disputes is more data so we can understand if ISPs are charging fair rates. Ideally, there wouldn’t be a charge beyond figuring out who buys the next server as is done in almost all other cases. But if there has to be a fee, or the FCC decides some kind of fair fee is available, then the process to interconnect should be simple, like as simple as signing up via a website and seeing the port provisioned. There shouldn’t be prolonged negotiations which would hurt small players. And the FCC should keep an eye on the process, because ISPs will use their last mile monopoly to extract whatever concessions it can. Does that feed your need for specificity?

      And in a perfect world, we’d have competitive broadband access at the last mile and this would be moot.

      • But, in your own experience, you saw that TWC upgraded the coax in your entire neighborhood to try to handle the increasing load. Any idea what that costs? How can you then say it is a simple as figuring out who buys the next server? As the ISP accepts more and more data into their network, they will need to make more and more of these internal capacity upgrades to deliver it to the end user.

        Maybe there is a case to be made that the ISP’s engaged in false advertising if they led you to believe that they had sufficient internal capacity to actually fill more than a small fraction of your 30 Mbps connection at a sustained rate. But, making that case, doesn’t make the advertised capacity suddenly appear. If someone falsely advertises flying cars, they will get fined, not obligated to bring a flying car to market.