Comcast “extortion” shows the need to treat broadband as a utility, Reddit’s Ohanian said

27 Comments

Credit: J Roberts

Alexis Ohanian, startup investor and co-founder of Reddit, lashed out at U.S. broadband policy on Thursday, calling on the FCC to reclassify internet broadband as “the utility we all know it to be.”

“Somehow America leads the world in tech innovation despite having the worst and slowest internet,” said Ohanian at the Bloomberg Next Big Thing Summit in New York City.

Ohanian aimed special vitriol at [company]Comcast[/company], affecting a mafia-style voice to accuse the cable giant of “legal extortion” for fiddling with [company]Netflix[/company] speeds until the video site paid it to restore proper service.

“It’s such a racket,” he said, adding that he worried that the next Netflix is being developed in a dorm room somewhere, but that bigger companies could exploit new internet rules to strangle future competitors in the crib.

Ohanian’s comments come as the FCC heads toward the end game in a process that will create new rules for the internet. The crux of the issue is whether the agency will reimpose rules that force broadband providers to treat all websites alike, or if companies like Comcast can charge sites to reach consumers.

Pressed by [company]Bloomberg[/company]’s Diane Brady over whether he would bet on the FCC actually imposing net neutrality through its so-called “Title II” power, however, Ohanian demurred and only said it would be “an act of deafness” if the agency did not.

His relunctance to offer a prediction is consistent with the predominant view in Washington, where few believe the FCC’s chairman will risk the ire of the powerful telecommunication lobby by imposing Title II.

In a follow-up chat, Ohanian said there is still time to sway momentum in favor of Title II, and added that the support of a big company like [company]Google[/company] could change the dialogue. He noted that the vast majority of employees at the company support classifying broadband as a utility, but that Google is now a large company like Amazon, whose interests lie on both sides of many major issues.

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27 Comments

Will Pio

I can’t actually understand why anyone would take the side of last mile ISPs. They are utter garbage by nearly every measurable metric.

Shrek

As a counter point, my broadband has increased speed every year or two and my price is about the same as 15 years ago. I also now have access to free access to wifi all over and really can’t think of an application that I can’t run with good performance. (save the occasional hickup or app level issue)

People keep telling me that this is “utter garbage” and how far behind we are, but this is not my experience.

I have 50Mbps service and on average US has 30+Mbps… you can do a lot with 30Mbps (measured) http://www.netindex.com/download/2,1/United-States/

PublicJury

New independent research shows that Netflix was using congested paths when other options existed for them. Based on this I think the “jury” needs more deliberation before the “extortion” conviction.

http://www.detroitnews.com/story/opinion/2014/10/07/netflix-net-neutrality/16824437/

Another explanation could be that Netflix was “fiddling” with specific ISPs to manipulate rankings and cause public pressures. Most started to question the Netflix rankings as they did not correlated with broadband experience, speed tests, FCC measurements or other more independent sites.

The Netflix “problem” coincided with Netflix’s migration off of 3rd party CDNs and with Netflix’s OpenConnect negotiation strategy. Internet delivery decisions are 100% in the control of Netflix

Jim Satterfield

You keep linking to that article like it’s beyond question. but I notice that the writer is head of some new lobbying organization and while I’m not certain of his proclivities I notice that he wrote a column for National Review Online and other “conservative” news organizations often cite him. Everything he ever writes sides with the current big ISPs so I really question the validity of this article.

tim

I think that’s a fair concern. Here’s a discussion from a more reputable source, with a lot of detail that you can judge by its own merit.
http://blog.streamingmedia.com/2014/02/heres-comcast-netflix-deal-structured-numbers.html
One of the interesting points he mentions is that Netflix routinely moves its business around, dropping one transit provider and picking up another as it seeks to find lowest cost. Fair enough, but then to pick a cheap one and demand it to be upgraded without cost is absurd.

JP

well they claim they need to upgrade to meet contractual obligations without cost to netflix. slightly different

Franklin Pierce

As important as Net Neutrality is, critical and essential to our technological future, I believe there is a good possibility that it is really a red herring in the “battle” to impose Metered Billing for internet service across the across the country. The cable and telecom monopolies will seem to “cave” on Net Neutrality and use that “loss” to justify charging by the gigabyte for internet service. This will result in a huge increase in prices and profits to these monopolies. And internet service is already the most profitable product they sell–by far.

Multiple credible studies–in multiple countries–have shown that Metered Billing is not justified and is a huge rip-off of consumers. Internet service is not like groceries, or gasoline or electricity. The incremental cost to the provider for each extra gigabyte of data, beyond some phoney “cap,” is almost nothing, almost unmeasurable. But the cable industry itself (FCC Chairman Tom Wheeler’s old employer) is publicly predicting the average consumer bill, just for internet service, will be $200-$300 in 3 to 5 years. The want to bill you “by the drink,” or in this case, by the TV show or movie. And not just a little. It will be more than any “tax increase” you ever thought of. $2,000 to $3,000 a year. That is not an exaggeration. With no vote for you.

Comcast SVP David Cohen has publicly told his shareholders that he expects to implement Metered Billing “across our entire footprint” in that same 3 to 5 year time frame. Metered Billing is their real objective–the pot of gold at the end of the regulatory rainbow. Huge profits.

If we let this happen, right in front of our noses, we are truly stupid.

Jarrod

You opinion here is pretty biased Sir, considering you are on the Advisory Board of the Minority Media & Telecommunications Council, a group which has public taken an anti-Net Neutrality stance, and receives thousands in contributions from telecommunications companies.

Ross

Here’s the thing- Netflix is already paying to put their traffic on the internet. The practice of internet content providers having to pay last-mile providers to *carry* their traffic is NEW. That’s why Netflix is out there yelling. Traditionally, they would pay a backbone provider to deliver their content. Now they’re paying backbone providers *and* last-mile providers (e.g. Comcast, Verizon, AT&T) to deliver their traffic.

Why is this happening? If you look at the FCCs report, the majority of households in the U.S. have 2 ISPs capable of offering 3mbit service, and by the time you get to 10 mbit, the majority of households only have one option. So, you have this great concentration of subscribers to only a few last-mile ISPs. If every household had several options for fast internet, no last-mile ISP would have the market power to demand content providers pay them to deliver the content- all the last-mile ISPs would be competing and making sure they had enough connection between their subscribers and the rest of the internet. As it sits today, without viable competition, the ISPs can ignore upgrading their connections to the rest of the internet, allow congestion to build up, and then demand the content providers pay them for access to their households. Also note that those connections to the internet are more than an order of magnitude cheaper today than they were 10 years ago, and the cost keeps going down, so it’s not expensive to upgrade them- it’s that the ISPs have no competition, and therefore no incentive to upgrade them.

Also note that being a cable-TV provider, Comcast in particular has a conflict of interest, since Netflix is a direct competitor to cable TV.

There are only a couple of ways to cut off this behavior; either ensure robust competition exists (it doesn’t today), or make charging content providers to deliver their content illegal.

PublicJury

“Here’s the thing- Netflix is already paying to put their traffic on the internet. The practice of internet content providers having to pay last-mile providers to *carry* their traffic is NEW.”

Having to pay, is new. Offering to pay is not. All the rhetoric about “we had no choice” is starting to show evidence of being false. http://www.detroitnews.com/story/opinion/2014/10/07/netflix-net-neutrality/16824437/

Netflix did have choices, but was still paying and wanted “free” and the best way to force free is to demonstrate a problem which can only be solved by being “free”.

Jason Llorenz

With respect to Alexis O (I love his fudgy the whale TED Talk) saying the US has the ‘worst and slowest Internet’ is flat wrong. see: NTIA’s latest report: http://www.multichannel.com/news/wireless/ntia-almost-99-americans-have-access-broadband/384817

And tying that falsehood to a drive toward a utility-style legal regime from a century ago not only jeopardizes the investments that are the only way the Internet will continue to get faster, but also threaten the app developers and small businesses that are thriving today. This is not the way to go to actually make the Internet better for the future.

Ross

Ahh, the lovely arguments of the last-mile ISPs. This is utterly false; The most connectivity build-out that occurred happened during the late 90s…. when we put in regulations that mandated telephone line-sharing at wholesale prices to other businesses wanting to provide internet connectivity. Suddenly, everyone built fiber networks, because there was real competition, for a while. Then we ended those regulations in 2005, and we haven’t seen substantial network build-out since. Why? Because there isn’t real competition amongst ISPs. Since then, the last-mile ISPs have been working tirelessly to ensure that there isn’t viable competition. Lawsuits against municipal broadband, lawsuits against ISP start-ups, the list goes on.

Also, you’re failing to back up any of the things you suggest might occur if we regulate broadband as a utility with even a shred of evidence of *why* they might occur.

Jarrod

You opinion here is pretty biased Sir, considering you are on the Advisory Board of the Minority Media & Telecommunications Council, a group which has public taken an anti-Net Neutrality stance, and receives thousands in contributions from telecommunications companies.

tim

That is funny. Ohanian is worried that “the next Netflix” will get strangled by big competitors if we don’t put more regulation on the ISP’s. And who is the biggest advocate of these regulations: Netflix. Because they are such good guys they want to make sure “the next Netflix” has a fair chance to take away their business?

Also, he loses a lot of credibility with the claim that the US has “the worst and slowest Internet.” Shouldn’t a decent reporter look up the validity of that claim?

Jarrod

You need to keep in mind that using the phrase “the next Netflix” does not only refer to video distribution start ups that would directly compete with Netflix. The phrase refers to all start ups that are innovating in ways that Netflix originally did with video distribution, breaking the status quo and introducing new products with modern business models. If the proposed FCC rules were in place when Netflix was in the crib, they could have not become the player they are today, and that is the point Ohanian, and Netflix, is trying to make.

Also, it is well documented that broadband speeds in the United States lag behind much less developed nations worldwide, such as Hungary, Latvia, Bulgaria, and even Estonia. Given the fact that the Internet was developed in the United States, and much of the global infrastructure passes through the country, there is no reason we should be ranked 27th in average global broadband speeds (src: http://www.netindex.com/download/allcountries/).

tim

I get your point that “the next Netflix” may not be a Netflix competitor. I was just pointing out the irony that a company which accounts for 30% of US peak internet traffic pretends that it is lobbying for all the little guys. That is pure nonsense. It is trying to reduce its own operating costs and deflect blame for poor performance away from itself. ISP’s have zero incentive to stifle new companies who are generating new reasons to use their network. Now, once those companies are established and turning a nice profit, the ISP might put their hand out for a share. Sure, that hurts Netflix, but probably doesn’t hurt the consumer. In fact, it will help the consumer, as well as new Internet businesses, when those extra revenues go into network capacity upgrades.

As for Internet speeds, Akamai puts the US at number 12, behind South Korea, Japan, Hong Kong, Switzerland, Netherlands, Latvia, Sweden, Czech Republic, Finland and Ireland. Yeah, we could do better, but we are hardly “the slowest”. It is a lot easier to wire up a small homogenous country where people live in dense urban areas, than a large sprawling population, with a huge variety of state and local governments, like the US.
http://thenextweb.com/insider/2014/06/27/akamai-global-average-internet-speed-24-year-year-3-9-mbps-mobile/

R.H.

Will you guys please stop complicating sound bites with facts? People have spent a lot of time manufacturing complex problems reporters don’t understand, measuring them with ISP rankings, and making up witty half truths to make cable companies look bad.

All your facts are just confusing our carefully manipulated masses.

Ryan Mathis

Make cable companies look bad? Maybe being part Canadian has dulled my ability to detect sarcasm so honestly I’m not sure if you’re kidding. Regardless the cable companies have pretty much done that themselves. They didn’t need the help of reporters to cement their reputation.

Verizon for example claimed that not being allowed to block websites was a violation of their first amendment rights.

“strip providers of control over which speech they transmit and how they transmit it, and they compel the carriage of others’ speech.”

I rest my case.

Skippy

Netflix is not responsible for any traffic on the internet. It is the users of the ISPs that desire the content of Netflix that are 100% responsible for all the traffic. Netflix does not send a single packet onto the Internet without the ISPs paying consumer requesting it.

That consumer is paying the ISP to deliver that packet to them and it is the ISPs responsibility to get it to them. The ISP should maintain their network to an adequate level so that the traffic their paying consumers are requesting does not create congestion in any part of their network whether it be at peering points or inside somewhere else like a neighborhood node. What that traffic is and who it is from is irrelevant to the ISP, their job and what they are paid to do, is to take a packet and pass a packet and maintain their network to do it efficiently.

The ISPs have chosen to not do what they are being paid to do and let the nodes congest so they can then extort money out of companies like Netflix because their service is popular and thus the ISP’s consumers create lots of traffic with it. As pointed out in the article; it is Netflix today, but what is going to be the next big popular app tomorrow that they attempt to extort money from?

It is the ISP subscribers that should be paying to upgrade the congested nodes and improve the ISP’s network if it is needed. Oh that’s right, they do already as that is the entire reason they pay the ISP to begin with every single month.

SkippyShill

This tired rhetoric is regurgitated over and over again by the exact same people. Yes ISPs are responsible to deliver the traffic, but it is the service provider (e.g. Netflix) that is required to responsibly hand it to them.

Netflix chooses the path and the facts are coming out that they have been choosing poorly as part of their negotiation process for free direct connections.

Netflix subscribers also pay Netflix and should be upset that Netflix used them as pawns in their battle for the net. Switching to Amazon, Hulu, etc showed great performance results…. I wonder why.

wildbow

Your reply doesn’t make a lot of sense, Tim.

Netflix is concerned about regulations because they were one of the first companies to get extorted into paying or being slowed down into oblivion. They’re understandably upset. Companies like Netflix, (which are big but not yet true giants), wind up being extorted: pay or their service gets downgraded and they lose their grip on things. We’ve already seen this happening.

Smaller business owners and entrepreneurs get squeezed out because they can’t shell out tens or hundreds of thousands for the extortion fees.

The people paying for service, you and me, wind up paying twice, because we’re paying more for stuff online so that companies can pay the cable giants, and we’re paying more at home, for ‘fast lane’ speeds that are essentially what we already have, or we get moved down to the slow lane, which is just hobbled internet.

The simple fact is that if we allow the cable corporations to go ahead with their slow lane/regular lane plans, the cable corporations, internet giants and the politicians they’re lobbying to get more cash in their pockets, and everyone else loses.

Chino Bo

@Tim

It’s called competition.. Look what’s going on with ISP, they have the government on their pockets. If the market is actually free market, then it would be more competitive and great for consumers.

United States may not be the worst and slowest. We are #27 around the world.
For the country who invented the internet, that’s just not acceptable.

flub

The US still has dial up internet and i read somewhere that there are a few hundred thousand using it, so saying the Us is slow is correct. Also if you look at most people complaining about speeds it is Americans, I am happy with 32mb down speeds but in the US i believe 4 mb is the speed qualifying for high speed internet access by isps and the FCC wants to raise that to 10mb down speeds.
When i say i have 32mb down i mean unlimited and not blocked in any way. And over 70% of the population have access to this speed or will by the end of 2015.

Then it is a simple process of upgrading to 1gb speeds which will be available to 80% for a reasonable price very soon, or within the next 3 years.You can get it now but it is still very expensive.

In America there are businesses that offer 1gb but only in small cities and only to a very limited amount of people in those cities. If all isps had to spend 50% of their profits for 3 years all homes in America could have fibre to the home and 1gb speeds, but investing in infrastructure is frowned upon in America for some reason, just look at the majority of roads that are as bad if not worse than some third world countries in a city like Chicago, which i was mazed at how bad some of the roads were. Damn i learnt for the first time about undercarriage insurance, something i have never heard about before in any of the Multitude of countries i have driven in, this is very telling of the quality of American roads in general..

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