Comcast’s deal with Netflix makes network neutrality obsolete

http://www.washingtonpost.com/blogs/the-switch/wp/2014/02/23/comcasts-deal-with-netflix-makes-network-neutrality-obsolete/

by adidash • 12 years ago

215 109 12 years ago

washingtonpost.com

pcurve2• 12 years ago

Those goofy diagrams are wonderfully effective at explaining the situation.

Worth noting is that Cogent is small potato and basically has no leverage. It barely does $300 mil in revenue. Compared that to most Tier 1 providers which do $10 bil+.

_delirium• 12 years ago

That's the part that makes me suspect the talk about this harming new entrants, startups, etc. is overblown. Afaict, the situation for small players is the same as it's always been: you pay for transit from an ISP with good connectivity, and you get good connectivity. If you have some colo racks somewhere with high-quality connectivity, your customers on just about any network have good access to your content. If not, you find a better colo facility.

The controversy here seems to be over what happens when you're a massive player and looking to get your bandwidth for less than typical retail transit prices. Then it enters the whole game of peering politics, which has changed considerably over the past 10 years. But if you're a relatively small startup with some colo racks, I don't see how that game is any more relevant today than 10 years ago: you still just buy transit. I mean, I personally have no trouble delivering my modest amount of content to Comcast users, and I've never paid Comcast.

I do think there is a general barrier to entry on the internet, because large players (YouTube, etc.) get free transit from peering agreements while new entrants don't, so any YouTube competitor is at a huge transit-cost disadvantage to Google. But that's a fundamental problem with the way the internet backbone has been built out of a mesh of private peering agreements, ever since it abandoned having a single neutral backbone run as a utility (originally by the NSF). I think going private was a mistake and benefits both big players and politically savvy ones, at the expense of new entrants paying commodity, but that's a (very) big issue to fix at this point. It's not an issue of "net neutrality", though: the traditional peering system is inherently non-neutral, not utility-esque.

the_ancient3• 12 years ago

You fail to see the big picture, most people do.

This is not unlike government regulation that "exempts" small business....

All this does is put an effective ceiling on a business. You will never be allowed to grow beyond X with out having to pay your protection money.

This hurts startups because VC and other investors want the business to grow beyond X and knowing their is an upper limit to the growth will make it very hard if not impossible to get investment.

doubt_me• 12 years ago

I have no idea how Tier 1 providers work but is it possible that in the future (5 - 10 years) more will be sprung up?

Or is it so costly that it will eventually be a single tier 1 in the future?

manicdee2• 12 years ago

There can be only one. The "competitive marketplace" is a fancy name for modern gladiatorial combat, played out with pens and contract forms instead of swords and shields.

sureshv2• 12 years ago

How many Tier 1 providers that aren't ILEC's, Cable or Wireless providers are doing $10B in rev? Akamai did $1.6B in rev last year. Edit: Level 3 does around $6B - that's the highest I've found of the independent players.

alttab• 12 years ago

And then we all grow up and realize that little Johnny can't run his competition on his competition without paying protection money.

All joking aside, there isn't much you can do. comcast owns the tubes. The world where they have to bend to the masses is a scary world.

Is this better? I dunno, only if Netflix goes out of business. This only really shortens comcasts rope long term. They just created a new market with this strong arm.

Grab your popcorn folks, this is going to get interesting.

zanny3• 12 years ago

I get the impression satellite Internet might be getting more popular.

TylerE• 12 years ago

speed of light says it won't, unless you like 400ms ping times.

XorNot2• 12 years ago

There's ample precedent (Bell) for what will happen to Comcast, though the real issue is so long as US voters put more emphasis on hearing the evangelism of free markets then seeing the implementation, nothing will change.

What's needed at a low level is laws that provide general access to street-level conduits and cabinets so competing ISPs (i.e. Google Fibre) can actually start up competing services to the big providers. Unfortunately efficiency would demand some level of government subsidy and the chances of that in the current environment trend towards zero (i.e. it would be way more efficient to have the government pay for the fibre to the home splice, and then let the big companies fight it out over who gets to attach a router to that and how that router is serviced).

manicdee2• 12 years ago

That's not a bad model: the last mile is usually the most expensive piece of any network to install, after all.

The Australian NBN was going to be something along the same lines: Government installs the common backhaul, last mile and "points of interconnect" then the corporations can install their points of presence & if required they can provide their own backhaul too.

Sadly Rupert Murdoch's party has decided that further proliferation of the very model the NBN was trying to avoid is a better way of spending the money.

drawkbox• 12 years ago

This may actually backfire on Comcast/Cox/TimeWarner/etc's own online streaming services they will be competing with Netflix on. Netflix hopefully realizes other providers will come asking for tier access that is faster. So then taken further, when Cox wants to deliver content beyond just Cox customers they can't, they'll have to pay. So this will also probably lead to some mergers into even less providers.

They have just locked provider based online streaming services into a worse off position in terms of cost to run. Hulu will also be caught in this since Comcast owns it. Netflix or independents that can get big enough and pay all the extortion fees will win. It is a whole new game, lots of toll roads.

zanny3• 12 years ago

I just want to mention the opening quip:

"For the past two decades, the Internet has operated as an unregulated, competitive free market."

Is just hilarious. Hilariously wrong.

mikeyouse2• 12 years ago

Who's regulating the internet in the US?

nacs• 12 years ago

The US government?

1stop3• 12 years ago

The hilarious part to me was that it will continue to be, comcast are a US provider. So whatever garbage the US ends up calling "the internet" the rest of the world will still have the internet.

vertex-four• 12 years ago

Except that we won't either, as the media companies (funnily enough, many of which are tightly tied to US ISPs) and Governments impose filter upon filter on us.

Tor, i2p, and GNUnet, will be the only places free from censorship, and even they will be labelled as being for criminals only; why would we want to bypass the filters, we must be either pirates or paedophiles. We're witnessing the swift end of the very short-lived era of free information for all over the next five years.

binarybits• 12 years ago

I was mostly thinking about the Internet backbone here, and I think this statement is correct. Until recently, there have been many backbone providers that compete with one another with minimal regulation.

ef4• 12 years ago

It only seems wrong from the perspective of a residential buyer.

Anyone buying transit did indeed experience a very competitive market. Why else has the cost of backbone bandwidth been steadily falling for a almost 20 years? Not out of the goodness of a monopolists heart.

modeless• 12 years ago

My hope is that the timing of this deal was calculated by Netflix to focus regulatory scrutiny on the Comcast/Time Warner merger. Netflix can now tell regulators that even though Comcast and TW don't compete for the same customers on the consumer side, the sheer size of the combined beast would make settlement-free peering a thing of the past.

zeckalpha• 12 years ago

Except they do compete for the same customers, no? The merger is with Time Warner Cable and not Time Warner.

However, even if they did merge with Time Warner, they would still be competing for the same customers, since Comcast is NBC is Universal.

mattmaroon• 12 years ago

There are probably not many markets in which Time Warner Cable and Comcast both exist. That's probably what he meant as its been a talking point.

hgilmoredotcom• 12 years ago

Article writer - Timothy B. Lee

More than a little coincidental.

gkoberger• 12 years ago

Completely different person than Tim Berners-Lee, despite the similarities.

JetSpiegel• 12 years ago

Yes, this one writes for Ars Technica.

grandalf• 12 years ago

Residential broadband is a business model that depends heavily on successful bandwidth utilization speculation. However since Netflix is extremely popular (close to half of all internet traffic in the US), the pattern gets extremely predictable and so there is little advantage to be had in the core business of bandwidth arbitrage, since it's being arbitraged "upstream" of residential ISPs and baked into the larger pipe prices.

If any service becomes sufficiently popular, the price of providing bandwidth for it to a large subscriber base approaches the characteristics of a dedicated bandwidth circuit for more and more nodes on the network.

Of course, Comcast is using it's last mile power as leverage, but the core issue the economics of bandwidth speculation.

jberryman• 12 years ago

Also something I never see mentioned is that this sort of seems to be how popularity works; that is "Popularity" tends to be zipf distributed

jjoonathan3• 12 years ago

A very interesting observation! However, bandwidth speculation would only be the core issue in a competitive market where price was determined primarily by infrastructure costs. What we have is the opposite of that.

The core issue is leverage. Bandwidth speculation is a distant second, even though it's much more interesting to us tech folks.

adventured• 12 years ago

The best accounting I've seen indicates Netflix is at roughly 1/3 of North American traffic:

http://allthingsd.com/20130514/netflix-still-eats-a-third-of...

Similar to where they were at the year prior:

http://allthingsd.com/20121107/netflix-has-plenty-of-competi...

Retric• 12 years ago

It's vary time of day dependent. At 10AM EST Netflix is a much lower percentage than at 10PM EST.

thatthatis2• 12 years ago

Paraphrasing

the FCC has no good solutions.

Yes they do, declare broadband to be a common carrier. Force comcast to sell wholesale access to their retail pipes to other companies who then compete for the end users. We've seen this show before and have good solutions to the problem. It's time to treat the Internet as a mature public utility and regulate it as such, i.e. regulate it to maximize social good

cdash• 12 years ago

That people are still fighting this I just can't believe. How can the internet not be viewed as an essential utility in the modern world is just crazy to me.

btbuildem• 12 years ago

Because they profit from it.

anigbrowl• 12 years ago

Stupidity and greed. Many people arguing about this at the Wall Street Journal, for example, are convinced that there are no such things as broadband caps or QOS levels and that everyone who uses Netflix streaming is freeloading without paying for the bandwidth they use. In their mind companies like Netflix and people who argue for net neutrality are identified with welfare cheats and socialism. I wish I were making this up.

interstitial• 12 years ago

Let me tell you about vested interest, rent-seeking, and regulatory capture. Three things that should be taught in elementary school, but never will be, because public education has all three in spades as well.

jcalvinowens• 12 years ago

YES

Aqueous• 12 years ago

There is no way in hell the aggregate interests of the telecom industry will allow broadband to be declared a common carrier.

jimbokun• 12 years ago

Unless the Internet companies (Netflix, Google, Amazon, Apple...) suddenly realize they, also, have their entire business models at stake and start lobbying just as hard as the telecom companies.

Netflix is there. The rest don't seem to realize how screwed they are, yet.

jedberg• 12 years ago

People keep saying this, but you have to dig deeper. Even the content producers don't want this.

Common carrier means multiple things, but one of them is that it sets a floor on the price for peering agreements. This means that currently free peering will have to become paid peering, and no one wants that.

It would actually give more money to the ISPs for something they are already doing.

eggnet• 12 years ago

You have to carve out the local access portions of the current ISPs into their own companies. Make those local access providers common carriers.

I think that is roughly what the gp is saying.

thatthatis2• 12 years ago

I'd like to investigate the price floor claim more, you have a link?

dragonwriter• 12 years ago

Common carrier means multiple things, but one of them is that it sets a floor on the price for peering agreements.

TL;DR for the following: [citation needed]

Designating broadband service as common carrier service, enabling the FCC to issue regulations of the type defined for common carriers to broadband providers would no doubt permit the FCC to set a non-zero price floor for peering, but I'd like to see what law would require the FCC to set a non-zero price floor if it designated broadband service as common carrier service.

Shivetya• 12 years ago

Hell no.

We will go back to a day where whatever speed you get is all your ever going to see. I know people hate Comcast/etc but where I lived all I had was what the phone company, THE COMMON CARRIER, wanted to offer us until the cable companies came in.

We got a wonderful choice of dial up, ISDN, and T1. Eventually they gave us DSL but the roll out was so slow and the initial installs so buggy it was mind boggling. Then one day I get a flier in the mail, try cable! Five times the speed and what do you know, the phone company suddenly cut their prices and offered deals to get people back.

Common carrier means no competition at all. As in, your area may get an upgrade AFTER all the important people get theirs first, namely those with political connections or in tony neighborhoods. The rest of us, well its like waiting for the roads to be plowed.

flaviusb2• 12 years ago

This is the opposite of the common carrier model. In the common carrier model, there are many companies that you can choose from as a consumer from the get go, because the network is unbundled from a single company.

bicknergseng• 12 years ago

I live in San Francisco and only have one choice (AT&T Uverse). I am in a new building with fiber connections, but I'm stuck paying $150+ a month for 15MB internet and middle of the road TV. My Netflix is heavily throttled. My service hits 1000+ ms pings at least a few times an hour for minutes at a time. I often get download speeds far less than the rate I pay. I can't believe I'm saying this, but I even miss Comcast.

I honestly don't see how it could get worse with internet regulated as a utility. Imagine if my gas and electricity decided to not show up for a day.

jbcurtin2• 12 years ago

Just wait until this begins to affect our online gaming sessions.

cpeterso• 12 years ago

Netflix should pass on the "Comcast tax" to Netflix customers using Comcast. That might encourage Comcast users to switch ISPs (assuming competing broadband services are available to those users).

jonny_eh• 12 years ago

It might backfire and encourage Comcast customers to just use their Netflix-ish xfinity online streaming service (gag me).

r00fus• 12 years ago

I'd like to see someone try. Just read the Comcast "streampix" (wonder where you got that name, Mr. McDowell?) fine print:

They don't guarantee the same listings, quality or availability, and you have to have a certain Cable TV subscription level already (i.e., you're already being gouged).

I posit that Comcast's streaming customers and Netflix customers have very little overlap.

higherpurpose• 12 years ago

Good idea. If I were them (and if it was legal to do so) I would even call it the "Comcast tax".

danielweber2• 12 years ago

What if this lowers Netflix's costs for Comcast users, since it's now peering closer to the consumer? Should non-Comcast users have to pay a "we haven't signed a peering agreement with your ISP yet" tax to Netflix?

gemma• 12 years ago

assuming competing broadband services are available to those users

You are hilarious.

VintageCool• 12 years ago

If this is just about a peering agreement, then it didn't start with the Netflix - Comcast deal. Riot Games signed a peering agreement with some European providers earlier this year:

http://www.reddit.com/r/leagueoflegends/comments/1onydr/

awalton• 12 years ago

This is some seriously bad precedence. Perhaps it will be good ammunition for Netflix to take to regulators, but it's far more likely it's better ammunition for Comcast to use against Google, Facebook, etc.

I think the best thing that can be done is Netflix giving a complete and full account of the extortion that happened here, perhaps in front of congress.

bifrost• 12 years ago

If you're not a network operator, you probably should not be guessing how the internet works. I do enjoy some of the speculation (mostly because its ridiculous) but in general it really doesn't help to guess.

nnnnni• 12 years ago

Right, because net neutrality is ONLY about Comcast throttling Netflix. ಠ_ಠ

danielweber2• 12 years ago

Timothy B Lee is the Rush Limbaugh of Hacker News. Saying things that could technically happen, in the sense that they wouldn't violate the laws of physics, in order to get people good and angry.

Loic• 12 years ago

For people telling this is just peering agreement, this is not. It would be peering agreement if Amazon would be paying, because Amazon is providing the bandwidth to Netflix.

What I suppose is that under this agreement, Netflix is not paying Amazon anymore outbound bandwidth to Comcast and as such pays it directly to Comcast.

insaneirish• 12 years ago

Not all of Netflix's infrastructure is on EC2. They have in house built stuff to deliver content at the speeds they need.

xcrunner529• 12 years ago

EC2 is mostly only used for web hosting and other small infrastructure. Not the streaming parts, especially now that they are running their own CDN.

Executor• 12 years ago

Have a local common carrier, but make it a coop where customers and employers have 1/n voting right. That way you don't have a company with the benefit of a monopoly and the growth/innovation of the company depends on how much the majority of people want to pay.

Comcast’s deal with Netflix makes network neutrality obsolete

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