Verizon Public Policy on Netflix

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

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

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

Internet:
- 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