New Models and Conflicts in the New Models and Conflicts in the

Interconnection and Delivery Interconnection and Delivery of Internet-mediated Contentof Internet-mediated Content

©Rob Frieden, Pioneers Chair and Professor of Telecommunications and LawPenn State University

rmf5@psu.eduWeb site : http://www.personal.psu.edu/faculty/r/m/rmf5/

Blog site: http://telefrieden.blogspot.com/

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Analogies Used to Explain How the Internet Works

Several analogies and models provide a frame of reference for Several analogies and models provide a frame of reference for understanding how the Internet works. understanding how the Internet works.

It’s a cloud:It’s a cloud:

It’s a network of networks:It’s a network of networks:

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Analogies Used to Explain How the Internet Works

It’s a series of tubes: It’s a series of tubes:

It’s part of a broadband communications supply chain:It’s part of a broadband communications supply chain:

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Analogies Used to Explain How the Internet Works

It’s a hierarchy of protocols:It’s a hierarchy of protocols:

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A Working Definition

Consider the Internet as the product of seamless interconnection between servers, Consider the Internet as the product of seamless interconnection between servers, routers and broadband subscribers using the telecommunications transmission routers and broadband subscribers using the telecommunications transmission networks of many, often-unaffiliated operators.networks of many, often-unaffiliated operators.

We should concentrate on the network links of these operators that go by several We should concentrate on the network links of these operators that go by several different names: Internet Service Provider (Tier-1, Tier-2, retail) Content Distribution different names: Internet Service Provider (Tier-1, Tier-2, retail) Content Distribution Network, Peer, Transit Lessee, etc.Network, Peer, Transit Lessee, etc.

Source: George Ou, http://www.digitalsociety.org/2009/11/fcc-nprm-ban-on-paid-peering-harms-new-innovators/

66Source: George Ou, Digital Society, http://www.digitalsociety.org/2010/12/division-of-labor-between-broadband-and-cdn/

Four Phases in Internet Development

1)1) Incubation--government administration, first through the United States Incubation--government administration, first through the United States Defense Department and later through the United States National Science Defense Department and later through the United States National Science Foundation and research institutes throughout the world (1980s-1995);Foundation and research institutes throughout the world (1980s-1995);

  2)2) Privatization--governments eliminate financial subsidies obligating Privatization--governments eliminate financial subsidies obligating

contractors to assess whether and how to operate commercially (1995-1998);contractors to assess whether and how to operate commercially (1995-1998);  3)3) Commercialization—private networks proliferate as do ventures creating Commercialization—private networks proliferate as do ventures creating

software applications and content that traverse the Internet. The “dotcom software applications and content that traverse the Internet. The “dotcom boom” triggers irrational, excessive investment and overcapacity (1998-boom” triggers irrational, excessive investment and overcapacity (1998-2001); and2001); and

  4)4) Diversification—after the dotcom bust and market re-entrenchment, Internet Diversification—after the dotcom bust and market re-entrenchment, Internet

survivors and market entrants expand the array of available services and ISPs survivors and market entrants expand the array of available services and ISPs offer diversified terms, conditions and rates, including price and quality of offer diversified terms, conditions and rates, including price and quality of service discrimination needed by “mission critical” traffic having high service discrimination needed by “mission critical” traffic having high bandwidth requirements, e.g., full motion video content. ISPs and even bandwidth requirements, e.g., full motion video content. ISPs and even content providers can use deep packet inspection to identify traffic for “better content providers can use deep packet inspection to identify traffic for “better than best efforts,” and other forms of prioritization at one extreme and than best efforts,” and other forms of prioritization at one extreme and blockage/throttling at the other. blockage/throttling at the other.

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Many Interconnection Models Work Many Interconnection Models Work in the Current Phasein the Current Phase

Until its privatization and commercialization, the Internet carriers typically used a zero Until its privatization and commercialization, the Internet carriers typically used a zero charge, “peering” process that assumed a “rough justice” balance of traffic; even if charge, “peering” process that assumed a “rough justice” balance of traffic; even if traffic flows weren’t equal, governments rather than the carriers usually paid.traffic flows weren’t equal, governments rather than the carriers usually paid.

Carriers operating in the now fully commercialized Internet pay close attention to traffic flows and now limit peering (barter) to equals in terms of bandwidth capacity, locations served, subscriber population, etc. Smaller ISPs now pay for “transit.”

Substantial increase in downstream traffic handed off to retail ISPs triggered by IPTV/OTT and end user demand for access anytime, anywhere, via any device and in any presentation format; the end of “appointment television” with content delivery to at least 4 different screens (TV, PC, smartphone and tablet).

As the nature and type of ISPs proliferate, so have interconnection models; for example a Content Distribution Network will have lots of traffic to deliver downstream, and possibly very little to handle upstream.

Traffic imbalances can trigger interconnection compensation disputes, e.g., Cogent-Comcast; Netflix-Comcast; Level 3-Comcast. 88

Many Interconnection Models Work Many Interconnection Models Work in the Current Phasein the Current Phase

ISPs consider price and QOS discrimination essential for generating new ISPs consider price and QOS discrimination essential for generating new profit centers; the Internet largely shifts from “best efforts,” “one size fits profit centers; the Internet largely shifts from “best efforts,” “one size fits all” into a largely differentiated medium.all” into a largely differentiated medium.

New alternatives to the peering/transiting dichotomy including use of New alternatives to the peering/transiting dichotomy including use of Internet Exchange Points by Tier-2 ISPs, paid peering (Comcast-Netflix), Internet Exchange Points by Tier-2 ISPs, paid peering (Comcast-Netflix), CDN surcharges (Level 3-Comcast), equipment co-location, e.g., Netflix CDN surcharges (Level 3-Comcast), equipment co-location, e.g., Netflix Open Connect Network; “specialized networks” and Intranets/ Open Connect Network; “specialized networks” and Intranets/ Multiprotocol Label Switching and non-carriers like Google securing Multiprotocol Label Switching and non-carriers like Google securing Autonomous System identifiers..

Content providers increasingly trade off maximum market penetration for Content providers increasingly trade off maximum market penetration for smaller shares of paying customers; without firewalls and effective smaller shares of paying customers; without firewalls and effective authentication, premium content won’t be offered. authentication, premium content won’t be offered.

Even end users want “better than best efforts” routing of “mission critical” Even end users want “better than best efforts” routing of “mission critical” bitstreams, e.g., movies, pay per view, live, full motion video.bitstreams, e.g., movies, pay per view, live, full motion video.

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New Incentives Risk Network Balkanization New Incentives Risk Network Balkanization and Challenges to the Goal of Ubiquitous Accessand Challenges to the Goal of Ubiquitous Access

Level 3-Comcast DisputeLevel 3-Comcast Dispute

In late 2010 Comcast imposed a traffic delivery surcharge when Level 3 became the primary CDN for Netflix.

Level 3 characterized the surcharge as a discriminatory toll while Comcast framed the matter as a commercial peering dispute.

Comcast is correct if one narrowly focuses on downstream traffic termination.

But more broadly the dispute raises questions about the scope of duties Comcast owes its broadband subscribers and whether Level 3 is entitled to a good faith effort by Comcast to abate the traffic imbalances with upstream traffic.

It also raises questions about the flow of compensation due participating carriers downstream from sources with which retail ISPs do not directly interconnect.

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Misconceptions (or Misrepresentations) Misconceptions (or Misrepresentations) in the Level 3-Comcast Disputein the Level 3-Comcast Dispute

Retail ISPs providing the “last mile” delivery of traffic do not directly receive compensation from upstream sources of content such as Google, Netflix, YouTube and Hulu.

The peering process traditionally involves directly interconnecting carriers. This means Netflix has the responsibility of securing the services of a CDN, such as Level 3, but Level 3 bears the direct interconnection burden with retail ISPs such as Comcast.

It is untrue to assert that hyper giant sources of traffic, do not pay for delivery of their content. Comcast enjoys the ability to charge twice in what economists term a double-sided market: 1) monthly retail broadband subscriptions, now tiered by transmission speed and amount of content downloaded; and 2) peering/transit with upstream ISPs and CDNs such as Level 3.

Note that Comcast successfully imposed a surcharge on its peering partner Level-3 when Netflix traffic upset the balance of traffic flows.

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Netflix-ComcastNetflix-Comcast

Once an advocate for network neutrality, Netflix has opted for higher QOS by securing dedicated access to the Comcast network which includes transcontinental and “last mile” traffic delivery. This arrangement reduces the number of networks and routers typically used thereby promoting lower latency, higher quality service even during congestion.

Such “better than best efforts” routing achieves the same enhanced cloud experience as achieved when companies like Akamai install proxy servers and mange traffic for “mission critical bits.”

Paid peering and conferral of “Most Favored Nation” treatment of specific traffic streams has triggered a vicious debate over what constitutes reasonable price and QOS discrimination.

Netflix’s payments to Comcast are offset in part by reduced or eliminated payments to CDNs, but the accrual of more revenues for retail ISPs raises concerns about rising bottleneck/last mile control.

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Consequences of the Netflix-Comcast DealConsequences of the Netflix-Comcast Deal

Pressure to Upgrade--More better than best efforts routing options with the possible risk that content sources with far less volumes than Netflix might face severe pressure to migrate from standard, “best efforts” delivery.

Higher Broadband Profit Margins--Broadband rate increases through tiering transmission bit rate and download allotments. Likely substantial narrowing in the gap between wireline (200 or more Gbytes) and wireless (250 Mbytes to 10 Gbytes).

More Subscriber Options for Avoiding Download Debits--ISPs will “soften the blow” of stingy download caps with expanded opportunities for content and service providers to pay in lieu of metering the download.

ISPs Demand More Incentives to Upgrade--ISPs will leverage network upgrades in exchange for better interconnection terms with content providers, CDNs and upstream carriers.

More Interconnection Compensation Disputes—Lots of finger pointing when QOS declines. Was Netflix to blame when it made the 2d season of House of Cards available, or was it cheapskate CDNs, or something nefarious at the last mie?

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Lessons From Mission Critical Television Retransmission DisputesLessons From Mission Critical Television Retransmission Disputes

For added leverage in a content retransmission disputes both Fox and CBS identified cable television subscribers seeking access to blocked content available via the Hulu and CBS web sites. Fox denied Cablevision subscribers access and instead sent this message:

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Good News and Bad News in Dispute Resolution

The Good News: Commercial negotiations can resolve most disputes with limited, if any harm to consumers and without regulator intervention.

The Bad News: Broadband access has become a near essential. Any access dispute resulting in network balkanization or blockage can cause significant harm to consumers.

Currently the FCC has no direct statutory authority (Comcast v. FCC and Verizon v. FCC), but has unspecified power to promote broadband access under Sec. 706 of the Communications Act. Promoting “advanced telecommunications capability cannot translate into nondiscrimination and anti-blocking rules. The Commission can require transparency possibly including ISP disclosure of special interconnection/compensation arrangements.

Unclear how far the Commission can go with “ ancillary jurisdiction” and “quasi-common carrier” duties affirmed in two recent courts cases and in a series of cable television carriage cases:

Cellco (affirming the FCC’s decision to require wireless carriers to provide compulsory data roaming); Arlington (affirming FCC identification of reasonable deadlines for state and local authorities to act on wireless tower applications); and Southwestern Cable (broadcast signal must carry), but not Midwest Video II (compulsory public access channels).

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Developing Trends

Heretofore private carrier negotiations (peering, transit, retransmission consent) have reached closure, albeit not always on a timely basis, even as subscribers continue to pay during negotiations. Expect consumers/voters to complain vigorously if interconnection disputes don’t get resolved quickly.

Interconnection negotiations may bog down or harm consumers, particularly if compensation and conduit neutrality issues are triggered. Broadband and telephone subscribers expect their subscriptions to guarantee ubiquitous, high quality and reliable access not conditioned on multiple interconnection agreements with upstream carriers.

Some retail ISPs expect compensation from 3 sources: 1) end users; 2) directly interconnecting upstream carriers with asymmetrical traffic volume, e.g., CDNs and 3) major upstream (and not directly interconnected) content sources/distributors, e.g., Netflix.

Interconnection has become less hierarchical. ISPs and content providers regularly try new interconnection options, e.g., Netflix has tried to secure permission to install a large proxy on ISP premises; Google and other major content sources have secured their own Autonomous System identifiers and will pursue direct (and cheaper) interconnections.

Regulation arbitrage or avoidance can affect interconnection strategies, e.g., Comcast’s invoking the FCC’s “specialized network” exception to open access rules when it offered video on demand via X-Box without debiting an otherwise applicable download allocation.

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