Observations of an Internet Middleman (Level3) (was: RIP

Owen DeLong owen at delong.com
Fri May 16 13:54:33 UTC 2014

All the talk about ratios is a red herring… The real issue boils down to this:

1.	The access (eyeball) networks don’t want to bear the cost of delivering what they promised to their customers.
2.	This is because when they built their business models, they didn’t expect their customers to use nearly as much
	of their promised bandwidth as they are now using. Most of the models were constructed around the idea that
	a customer receiving, say 27mbps down/7mbps up would use all of that bandwidth in short bursts and mostly
	use less than a megabit.
3.	New services have been developed (streaming video, et al.) which have created an increasing demand from
	customers for more of the bandwidth they were sold.
4.	Instead of raising the prices to the access network customers or accepting that the lavish profits that they eyeball
	networks had been pocketing were no more, the access networks are trying to slough off the costs of delivering
	that higher fraction of what they sold onto someone else.
5.	The content providers looked like an easy target with the advantage that:
	A.	Some of them appear to have deep pockets.
	B.	They are the competition for many of the access network’s other lines of business, so increasing their costs
		helps make them less competitive.
	C.	Consumers are emotional about price increases. Content providers look at it as a business problem and
		perform a mathematical analysis. If their customer satisfaction impact costs more than paying the extortion
		from the access networks, they’ll pay it.

In reality, if the $ACCESS_PROVIDERS wanted to satisfy their customers, they’d be aggressively seeking to peer with content providers in as many locations as possible. They might (reasonably) require content providers to build out to additional locations to keep their long-haul costs down (It’s reasonable, IMHO, for a content provider not to want to carry multiple gigabits of traffic from a content provider clear across the country for free. If $CONTENT_PROVIDER wants to access California customers of $ACCESS_PROVIDER, then it’s reasonable for $ACCESS_PROVIDER to insist that $CONTENT_PROVIDER peer in California for delivering those bits.)

Neither side of this issue has completely clean hands. Both have been trying to take as much of the money on the table for themselves with limited regard for serving the consumer. The Access Networks have done a far worse job of serving the consumer than the content providers and that’s a big part of what is driving the current backlash. As a general rule, access customers don’t select the provider they love the most, they select the one they think sucks the least.

I think the recent FCC NPRM is a bit optimistic in that it expects the $ACCESS_PROVIDERS to act in good faith. If they do, it will likely turn out to be a limited victory for the $ACCESS_PROVIDERS. However, I don’t expect the $ACCESS_PROVIDERS to live within that limited victory. Assuming the NRPM becomes rule and then withstands the likely legal challenges, I expect they will, as usual, play in the gray areas of the ruling as much as they think they legally can and push the edges as far as possible to try and extort every dollar they can from $CONTENT_PROVIDERS with this so-called fast-lane (which we all know is just preferential peering and/or QoS[1] tuning).  I suspect they will likely push this far enough that over the next several years, things will get progressively worse until the FCC finally decides that they have to move from section 706 to Title II.

OTOH, if I’m wrong and the $ACCESS_PROVIDERS suddenly start behaving like civilized companies, develop a sudden concern for their customers’ experiences, and start unimaginably acting in good faith, the proposed rule wouldn’t be so bad for $CONTENT_PROVIDERS, $CONSUMERS, or $ACCESS_PROVIDERS. 

Of course, you can already see the $ACCESS_PROVIDERS laying the groundwork to try and mount a legal challenge against the FCC’s authority to use rule 706. Sadly, some of this groundwork is being laid by FCC commissioners. Said commissioners clearly have no interest in representing the people’s interest and are strictly there as mouth-pieces for some of the big players in the industry.


[1] QoS — A deceptive name if ever there was one. QoS is not about Quality of Service, it’s about screwing over network users by choice rather than by chance when you haven’t built an adequate network.

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