Spin and speculation

Does the FCC want to oversee peering deals like Netflix vs. Comcast?

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The FCC will soon pass new rules for how ISP’s must handle broadband traffic and, while it’s expected to impose a policy of net neutrality when it comes to consumers, it’s been less clear how the agency will resolve another thorny internet issue: whether network providers can charge content companies to accept their traffic — and throttle their streams if they don’t pay. On Wednesday, a report surfaced that suggested how the issue will play out.

The issue, known in the industry as peering or interconnectedness, became a hot topic last year as Netflix feeds failed across the country, leaving consumers to shout at their screens and wonder who to blame. Big broadband providers like Comcast and Verizon sought to fault Netflix and the content companies, claiming they should have to pay a toll to offset the large volumes of internet traffic they create.

Netflix and traffic management services like Level 3, however, claimed that the ISPs has deliberately degraded their traffic by refusing to carry out low-cost upgrades to key internet ports. Calling the tactic a form of extortion, the content companies have also accused the ISPs of double-dipping — saying the ISP’s already charge consumers to receive the internet, and those charges should include all infrastructure fees on the backend.

Now, a long report from Bloomberg cited a source that claims to know how FCC Chairman Tom Wheeler plans to resolve this grand conflict.

According to the source, Wheeler is prepared to bless those paid peering deals as part of a larger framework of internet rules. But he will reportedly also do so in a way that permits the likes of YouTube or Vimeo to complain if the ISP’s are not being “fair or reasonable” with their agreements. As the report said:

FCC Chairman Tom Wheeler has decided the rules, scheduled for a vote next month, will permit the agreements but include a procedure for companies to ask for agency review, said the person, who asked to remain anonymous because the plan hasn’t been made public.

This pronouncement, however, may be premature.

Blanket ban or case-by-case?

No one will be surprised if the issue of interconnectedness appears in the first draft of the new FCC rules which, under law, must be circulated by Chairman Tom Wheeler to the other FCC Commissioners at least three weeks before a vote. These are expected to go out (and get leaked to the press) on February 5.

Indeed, Wheeler demanded data from the companies last summer, as part of an investigation into the public outrage that occurred over the stuttering Netflix streams.

The big question now is not just whether Wheeler will include peering agreements in a larger framework of rules, but the way in which such arrangements will be overseen.

According to a source familiar with the debate, ISPs are likely reconciled to the fact that their current paid arrangements with Netflix, which are currently unregulated, will come under the nose of the FCC in the future.

As such, they are now pushing to ensure that any enforcement occurs on a case-by-case basis over whether a given deal is “fair and reasonable,” rather than in response to a bright line rule that outlaws the sort of pay-for-service deals the ISP’s forced on Netflix last year.

The Bloomberg report, which does not cite any documents and on which the FCC declined to comment, suggests that Wheeler has decided to go with the case-by-case approach. While this would nominally ensure fair oversight, it would also allow the ISPs, as they have done in the past, to deploy their formidable legal teams to ensure any complaints would take years to resolve. In other words, this could be a case where ISPs are trying to make the best of a bad outcome.

As such, it’s unclear if the report is a bona fide insight into Wheeler’s thinking, or is instead just an opening salvo in what is sure to be a ferocious spin cycle as the day of the FCC vote gets closer.

6 Responses to “Does the FCC want to oversee peering deals like Netflix vs. Comcast?”

  1. The Internet has always worked is content and eyeballs have always paid for capacity.

    Language such as
    “outlaws the sort of pay-for-service deals the ISP’s forced on Netflix last year.”
    Suggest that no content should have to pay. Any hosted websites and virtual server I have had (puny in comparison) in the past cost me money for Internet connectivity. So if Netflix is supposed to get free capacity for their servers, I want free connectivity for my servers too.

    Through regulation, we can force a different business model on the Internet (like the cable TV model) but it wouldn’t be what the Internet has been historically. There would be only a few content bundlers like we have with TV.

    If the Netflix middleman (the transit providers like Cogent) sell too much capacity at a rock bottom rate to Netflix and can’t deliver that everywhere then that is problem for Cogent and Netflix signed a bad contract. When I went with the worst hosting companies that couldn’t deliver capacity (servers and Internet bandwidth) I didn’t blame third parties. And it was my fault for chosing someone who couldn’t deliver.

  2. Look, this is simple. Consumers pay already outrageous prices for broadband speeds. I pay over 100 dollars a month for a 100Gb connection. I have paid to have content delivered to me on a 100Gb pipe. If I max that pipe out, I max it out. I paid for it. The ISP infrastructure on the back-end should absolutely support me maxing out that connection to access whatever content I want to access without a content provider having to pay my ISP. If the ISP’s infrastructure cannot support the amount of data traversing their networks, then they should stop selling people broadband.

    It’s insane to allow this nonsense to continue.

    Take what the ISPs are doing now and apply the same logic to something like the delivery of water. Say I paid the water company 100 dollars a month to provide me water at the rate of 100 gallons per second. They sold me that capability. But then they turn around and tell the company that owns the water reservoir, hey uh, we need to get this guy 100 gallons a second, so you need to pay us to upgrade our pipes to support that. Ridiculous.

    • gwenie Mugliston

      You get 100 Gb for 100 bucks? Lucky you. I pay $118 for 8 mbps from COMCRAP and I have a stable IP address and a “Business Account”. I bet they laugh all the way to the bank with money like mine for nothing….I can’t even down load videos half the time. The alternative is Satellite…in a snow belt. Sure..

  3. Llord Eevil

    You can’t make a blanket ban on peering agreements. They are necessary for the internet to survive in its current form. Different prices have to be made and negotiated because each connection brings a whole different set of conditions to the table.

    If there was a ban we would create a leech like system where the more robust and built up networks were subsidizing networks that weren’t carrying a significant load.

    • Peering agreements are very important. However, you and the ISP’s are muddying the water here. ISPs are doing it purposely but I believe you are simply falling for their smoke and mirror trick. First thing you need to do is to ignore Netflix as that is a symptom of the problem, not the problem. Sure there is lots of Netflix traffic out there, but 100% of that traffic is requested by ISP subscribers that are paying an ISP to deliver it. Just like this website.

      Here is the deal as I try to simplify it: A peering agreement between an ISP and a backbone provider is much different then a peering agreement between 2 backbone providers. Deals between backbone providers are done to allow traffic to cross the Internet without requiring each company involved to have the physical infrastructure to get everywhere. It is mutually beneficial and typically they do it free or at very low cost as they send and receive about the same amount of traffic from each other to reach parts of the internet they would have to otherwise build out to inorder to reach it.

      Now deals between an ISP and a backbone provider is totally different as ISP’s are basically end nodes and they typically receive 10-20x’s more data then they send. This is done because consumers of the ISP consume traffic from the internet as it is download instensive which allows ISPs to typically sell their connections asymmetrical and even limit the traffic that their subscribers can upload by placing restriction on services in their TOS. As a result of this an ISP does not ever get free peering with a backbone provider. They pay to be a part of the Internet and if you start an ISP today the first thing you will be doing is negotiating with backbone providers so that you can pay them to be a part of the Internet. This is 100% fact and exactly how the internet has always worked.

      However, and this is where it gets muddy, what we have now are 4 very large ISPs that have such a large physical network because of their extremely large foot print. (NOTE: It was only these 4 ISPs that forced Netflix to peer with them.) Ultimately, this has resulted in them being able to peer as a backbone provider for others as well as an ISP to their paying subscribers. So now some traffic will cross their peering points and pass across their network to reach another network (backbone traffic) AND the rest has absolutely no intention of leaving their network and will terminate on their network (ISP traffic). This is ISP traffic they use to have to pay for and if their subscribers caused congestion on that node they would pay to upgrade the node as normal business operations to manage their network adequately.

      Though they play with words, the reality is that the backbone providers are not “sending” tons of traffic to that peering port. It is the ISP subscribers of the ISP that are “pulling” tons of data to that peering point. This will continue to be an issue as the large ISPs continue to grow and are allowed to muddy the water as to what the traffic is that is crossing their peering points.

      The result of allowing companies to do pay peering will result in companies like AT&T, Comcast and Verizon not voluntarily upgrading a port that is saturated. They will allow the services coming across them to degrade as typically consumers have no choice and can’t change ISPs to get away from it as there is very little if any competition in a vast majority of the US. So why would these ISPs take on the expense when they can hold out until content companies pay them directly in order to be able to provide a good service to their consumers.

      Bottom line is that allowing paid peering, like in Netflix’s case, is a disensentive for ISPs to manage and upgrade their networks.

      • What BS. Netflix is paying the ISPs for capacity that they and only they can use. Effectively, the ISPs are acting as transit networks for Netflix. There needs to be contracts specifying where they meet and how much capacity they will need so that ISPs can know where and when to purchase more middle mile capacity.