Verizon Public Policy on Netflix

Miles Fidelman mfidelman at
Fri Jul 11 15:09:42 UTC 2014

It strikes me that there are lots of legitimate, but conflicting, views 
on this topic - all of which come down to there being no clearly 
established principles for peering,  traffic exchange, or settlements 
(either de facto or imposed by law or regulation ---- and different 
player are coming from worlds with very different existing models.

Traditional package delivery:
- sender pays, shipping costs paid by purchaser
- COD model - purchaser pays on delivery

There's the traditional telecom model:
- end users pay for basic connection and local facilities (which, for 
corporate users includes PBX or Centrex costs)
- caller pays for end-to-end connection
- caller pays local carrier - with money flowing to both the long-haul 
carrier and the far-end local exchange carrier (somewhat modified, for a 
time, when it was common to have a separate long distance carrier, and a 
separate bill)
- and then there's the whole realm of 900 numbers - money is collected 
by the telco, but forwarded to 3rd party providers

- pay by the minute for connection, at both ends - settlements up and 
down the chain

- end user pays for connection and content
- cable company pays content providers

- users pay for access, pay more for a larger pipe
- access networks pay for connections to backbone networks
- some formal exchange points
- lots of back-room peering arrangements
- general principle of settlement-free peering when traffic flows are 
equal in both directions
- big problem with large one-way flows (e.g., the purported 1/3 of 
Internet traffic that consists of Netflix video streams - not sure I 
completely believe that statistic, but video sure seems to dominate the 
net these days, with a lot of it coming from Netflix and maybe YouTube)

So... which model to apply:
- shipping model: sender pays shipping, bundled in price (we all pay 
Netflix, Netflix pays all the carriers)
- COD model: (we're still paying Netflix, but Verizon collects and 
forwards the dollars)
- telephone model: caller pays (but the notion of caller is kind of 
tricky in a P2P
- cable model: customer pays local carrier, local carrier pays all the 
upstream costs for both content and carriage (Verizon becomes Netflix 
customer, pays Netflix)

And that's before we get into settlements - whomever pays the initial 
bill, and whomever collects it - who pays the folks in them middle.

There are real costs, ultimately the end user pays the bill - so it 
comes down to who collects the dollars and how they get distributed.  
Where it gets muddied up is when:
- we try to avoid models that are "unfair" and/or "anti-competitive" 
and/or threaten to Balkanize the net ("Fast Lanes," "net neutrality," 
"common carriage") - a rather important set of considerations to most of us
- big players start pointing fingers in the interests of pushing costs 
onto others while maximizing their own profits

All in all, one big mess.

Miles Fidelman

In theory, there is no difference between theory and practice.
In practice, there is.   .... Yogi Berra

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