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DATE 2014-05-01

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http://www.vox.com/2014/5/6/5678080/voxsplaining-telecom


Comcast is destroying the principle that makes a competitive internet
possible

Updated by Timothy B. Lee on May 6, 2014, 8:00 a.m. ET
Tweet Share 53 Comments Print
David Cohen of Comcast and Arthur Minson Jr. Time Warner Cable, wait for
the start of a Senate Judiciary Commettee hearing on the proposed merger
between their companies on April 9, 2014. Mark Wilson/Getty Images
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Conservatives love the internet. They don't just love using it, they
also love to point to it as an example of the power of free markets. And
they're right. The internet has had a remarkable 20-year run of rapid
innovation with minimal government regulation.

That was possible because the internet has a different structure than
other communications networks. Most networks, like the 20th century
telephone market, are natural monopolies requiring close government
supervision. But the internet is organized in a way that allows markets,
rather than monopolists or government regulators, to set prices.

That structure has been remarkably durable, but it's not indestructible.
And unfortunately, it's now in danger. In recent years, Comcast has
waged a campaign to change the internet's structure to make it more like
the monopolistic telephone network that came before it, making Comcast
more money in the process.

Conservatives are naturally and properly skeptical of government
regulation. But this is a case where the question isn't whether to
regulate, but what kind of regulation is preferable. If federal
regulators don't step in now to preserve the structures that make
internet competition possible, they will be forced to step in later to
prevent the largest ISPs from abusing their growing monopoly power.
The old, busted way to run a network

For most of the 20th Century, the telephone market looked like this:

Figure_1

The telephone industry was dominated by a single monopoly called AT&T.
Everyone paid AT&T a flat subscription for a telephone. Long-distance
calls came with an extra per-minute fee.

If you want to build a network that reaches everyone in America and
provides a consistent quality of service, this isn't a bad way to do it.
But it has some obvious problems that practically require government
oversight.

The simple danger is that monopolies tend to charge high prices. Another
problem is that monopolies are often bad for innovation. If you had an
idea for a new telecommunications product in 1950, you needed AT&T's
permission to try it. And AT&T generally refused to allow third-party
devices to be attached to its network. Regulators had to step in
frequently to force AT&T to be more accommodating toward third-party
innovators.

In 1974, the Ford Administration began a lawsuit that led to AT&T's
breakup a decade later. The result looked like this:

Figure_2

AT&T was forced to spin off its local telephone business into seven
independent companies that were dubbed the "Baby Bells." The economics
of long-distance calling became a lot more complicated. Before, making a
long-distance call just involved one company, AT&T. Now it involved
three companies: a Baby Bell at each end and a long-distance company in
the middle. AT&T was one option for long-distance service, but it
competed against rivals such as Sprint or MCI. (Baby Bells are outside
the grey circle, long-distance companies are inside of it.)

The long distance market is based on a sender-pays principle, which I
have illustrated with green arrows. The customer who dials the phone
pays for the call. The payment goes to the long-distance company of the
customer's choice. The long-distance company, in turn, makes a payment
to the local phone company that operates the other end of the
connection.
The terminating monopoly problem

This restructuring of the telephone market helped to create a
competitive market for long-distance service. But there's still a
serious problem, known in telecom jargon as a "terminating access
monopoly." Suppose an Ameritech customer in Detroit wants to call her
sister, a BellSouth customer in Atlanta. She has several options for
long-distance service. AT&T, MCI, and Sprint are all competing for her
business. But no matter which long-distance company she chooses, that
long-distance provider is ultimately going to need to connect to
BellSouth to complete the call. That means BellSouth always gets to
collect a fee for the call.

"Thanks to competition among transit providers, prices have fallen by a
factor of 1000"

In a revealing post on its public policy blog, the modern AT&T (which
has reunited with four of its seven former subsidiaries) described what
happened as a result: "In the late ‘90s, CLECs began to tariff
ever-increasing rates for terminating access services." In plain
English, certain phone companies began demanding higher and higher fees
to complete incoming calls, a problem that ultimately forced the FCC to
regulate the market more strictly.

Unfortunately, while all-knowing perfectly benevolent regulators could
make this work, in practice regulators tend to be neither all-knowing
nor benevolent. Special interest can "capture" regulatory agencies and
bend rules to their own ends, and even when acting in perfect good faith
regulators simply may make the wrong call. Even worse, a regulated
system tends to discourage innovation since any company who'd be
disadvantaged by change can use the regulatory process to block it.

At the same time, regulation is the worst solution to the terminating
monopoly problem except for all the alternatives. The sender-pays rule
creates terminating monopolies. Absent price regulation, that will
necessarily lead to exorbitant prices.
How the internet solved the terminating monopoly problem

The solution was simple: get rid of the sender-pays rule. Internet
billing is based on a different principle, known as "bill and keep." It
works like this:

Figure_3

Note: Links are shown for illustration purposes only. I don't know if
companies really have the specific transit agreements depicted here.

In the bill-and-keep internet, companies at each "end" of a connection
bill their own customers — whether that customer is a big web
company like Google, or a an average household. Neither end pays the
other for interconnection. Instead, the Internet Service Provider (ISP)
at each end is responsible for ensuring that its traffic can reach the
ISP at the other end. This is part of the service that the ISP sells to
its customers, a guarantee that traffic will get where you want it to
go.

ISP's typically do this by hiring a third party to provide "transit,"
the service of carrying data from one network to another. Transit
providers often swap traffic with one another without money changing
hands. The transit providers are the ones inside the grey circle in the
middle of the figure.

""Every day I have someone come up to me and say 'Comcast came up to us
asking for money'""

The terminating monopoly problem occurs when a company at the end of a
network not only charges its own customers for their connection, but
charges companies in the middle of the network an extra premium to be
able to reach its customers. In a bill-and-keep regime, the money always
flows in the other direction — from customers to ISPs to transit
companies. And because the market for transit is highly competitive,
there's no need for government regulation of transit fees. It's an
ordinary market where if a transit company tries to charge too much,
ISPs will switch to another company.

Bill and keep has worked well. Thanks to competition among transit
providers, average transit prices have fallen by a factor of 1000 since
1998:

Screen_shot_2014-05-04_at_10.50.45_am

Typical market transit rates, based on data collected by DrPeering.com.

People who love the internet's lack of regulation have bill-and-keep to
thank. By solving the terminating monopoly problem, bill-and-keep makes
possible a robust and competitive market for internet connectivity that
requires minimal government oversight.
Comcast is trying to break bill-and-keep

Over the last four years, Comcast has engaged in a campaign to undermine
the bill-and-keep system. The effort first came to public attention in
2010. Level 3 had just signed a contract to host Netflix content, and
Level 3 asked Comcast to upgrade a connection between them to
accommodate the higher traffic. Level 3 expected this to be an easy sell
since Comcast had previously paid Level 3 for transit service. But
instead, Comcast demanded that Level 3 pay it for the costs of the
upgrade.

"Comcast has engaged in a campaign to undermine the bill-and-keep
system"

Since then, Comcast has evidently begun demanding that other transit and
content providers pay it for faster connections too. "Every day I have
someone come up to me and say 'Comcast came up to us asking for money,'"
says Tim Wu, the Columbia law professor who coined the term "network
neutrality."

Comcast itself has been silent on the details of these agreements, but
the company's defenders take it for granted that transit providers
should be paying Comcast, not the other way around. For example, Dan
Rayburn has argued that "the reason for the poor [Netflix] quality
streaming is that Cogent refuses to pay Comcast to add more capacity."
This, of course, is begging the question. Why should Cogent pay Comcast
to deliver content that Comcast customers requested in the first place?

In a letter to the FCC defending its handling of the dispute with Level
3, Comcast provides an answer. Comcast argued that the two companies'
"traffic ratio" — the ratio between the traffic Comcast was sending
Level 3 and the traffic Level 3 was sending Comcast — had been
thrown out of balance by the growth of Netflix streaming. Comcast
portrayed it as a standard industry practice for the network that sends
a disproportionate amount of traffic to pay the receiving network for
the costs of carrying the traffic.

But that's not how the internet works. Consumer-facing ISPs have always
received more traffic than they send out. Comcast itself sells
"unbalanced" internet service to its customers, with download speeds
much faster than upload speeds. That makes it inevitable that ISPs like
Comcast will receive more data than they send. But in the bill-and-keep
model, ISPs generally pay transit providers for connectivity, regardless
of traffic ratios.

The traffic ratio rule Comcast advocated in 2010 was a variation on the
sender-pays rule. It will create the same kind of terminating monopoly
problem that plagued the long distance telephone market. But that might
not seem like a bad thing if you own the monopoly.
The importance of market share

Two factors tend to make the bill-and-keep model stable. One is
competition in the consumer ISP market. If customers can easily switch
between broadband providers, then it would be foolish for a broadband
provider to allow network quality to degrade as a way to force content
companies to the bargaining table.

"A merged cable giant would have even more leverage to demand monopoly
rents"

The second factor is ISP size. When ISPs are relatively small, payments
naturally flow from the edges of the network to the middle because small
edge networks need large transit networks to reach the rest of the
internet.

Imagine, for example, if the Vermont Telephone Company, a tiny telecom
company that recently started offering ultra-fast internet services,
tried to emulate Comcast. Suppose it began complaining that Netflix was
sending it too much traffic and demanding that its transit providers
start paying it for the costs of delivering Netflix content to its
subscribers. Netflix and the big transit companies that provide it with
connectivity would laugh at this kind of demand. It would be obvious to
everyone that VTel needs transit service more than transit providers
need VTel.

But when an ISP's market share gets large enough, the calculus changes.
Comcast has 80 times as many subscribers as Vermont has households. So
when Comcast demands payment to deliver content to its own customers,
Netflix and its transit suppliers can't afford to laugh it off. The
potential costs to Netflix's bottom line are too large.

This provides a clear argument against allowing the Comcast/Time Warner
merger. Defenders of the merger have argued that it won't reduce
competition because Comcast and Time Warner don't serve the same
customers. That's true, but it ignores how the merger would affect the
interconnection market. A merged cable giant would have even more
leverage to demand monopoly rents from companies across the internet.

A century ago, the Wilson administration decided not to press its
antitrust case against AT&T, allowing the firm to continue the
acquisition spree that made it a monopoly. In retrospect, that decision
looks like a mistake. Wilson's decision not to intervene in the market
led to a telephone monopoly, which in turn led to 70 years of regulation
and a messy, 10-year antitrust case.

Obviously, the combination of Comcast and Time Warner would not dominate
the internet the way AT&T dominated the telephone industry. But recent
events suggest that Comcast is already large enough to threaten
competition on the internet. Preventing the company from getting even
larger might avoid the need for a lot more regulation in the years
ahead.

Comcast declined to comment for this story.
Live Q&A from 1pm to 3pm today!

Do you have question about broadband competition, peering and transit,
network neutrality, or other telecom issues? Leave them for me below in
comments! I'll be here from 1 to 3pm to respond.
Read more:

Five ISPs are slowing internet access to demand more money.
Congress votes to keep itself clueless on tech.
The new battle for the future of the internet.
FCC chair denies he's killing net neutrality.

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The new fight over the future of the internet

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There are 53 Comments.
Show speed reading tips & settings
Allison Rockey

Allison Rockey

Engagement Editor

Do you have a question about broadband competition, peering and transit,
network neutrality, or other telecom issues? Leave them for Tim here in
the comments. He’ll be here from 1 to 3pm ET to respond.
Posted on May 6, 2014 | 12:21 PM
joelle_gamble

joelle_gamble

A little while ago, the Obama administration announced the relinquishing
in federal control in the administration of the internet. What are some
of the expected benefits to global stakeholder governance and some of
the concerns, especially as it relates to freedom of usage.
Posted on May 6, 2014 | 12:52 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

This is a very slow and gradual process, and I don’t think it’s
yet clear how significant the Obama administration’s recent moves
will be. It’s important to understand that no one really
“governs” the internet—it’s a network of networks, with
each individual network voluntarily connecting to others.

“Internet governance” mostly refers to control over the domain
name system, the system that lets people translate from domain names
(“vox.com”) to IP addresses (“216.146.46.10”). Right
now, that’s handled by a US organization called the Internet
Corporation for Assigned Names and Numbers. World governments want to
see those functions performed by a more representative body. The Obama
administration has announced plans to end its formal relationship with
ICANN, but it’s not clear what would replace it.

It was probably inevitable that the US government would be forced to
seek more input from outside the US. But there’s some danger that
this could be a vehicle for foreign governments to censor online content
by blacklisting domain names. We won’t know for sure until we see
more details about what ICANN’s new structure will be.
Posted on May 6, 2014 | 1:25 PM Up
Small.vaffb0f4

aaballas

Barring federal intervention, what other remedies do you see to what
most of us agree is a very significant risk to net neutrality (in
Comcast’s actions)? Any potential free market solutions surfacing as
a result?
Posted on May 6, 2014 | 1:07 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

It would be great to see more projects like Google Fiber, which would
give consumers more options if their existing provider wasn’t
providing good service. It’s also possible that improved wireless
service could provide an alternative to incumbent broadband services.
However, I’m not too optimistic that these options will make a big
difference in the next few years. People have been predicting new
entrants into the broadband market for a decade and aside from Google
there hasn’t been much.
Posted on May 6, 2014 | 1:38 PM Up
Nilay Patel

Nilay Patel

Managing Editor of Destruction

Tim’s right, but I’m even more bleak about it. Markets require
competition, and that broadband providers rarely have any: most
Americans only have one or two choices for wired broadband, and the
wireless carriers aren’t really motivated to lower their insane
prices and margins to compete with that. Google Fiber is forcing prices
on some services to drop in the few cities it’s in, but Google has a
long way to go before it has the scale to really compete in Kansas City,
let alone the entire US.
Posted on May 6, 2014 | 1:45 PM Up
Small.vaffb0f4

communitynets

You know that I’m a fan of community owned networks because they
have different incentives from the massive cable firms. The question is
what happens when Google Fiber is simply the new monopoly? What if the
golden age of competition was dialup and we cannot return to it due to
natural monopoly characteristics?

In markets with fiber v cable, it seems that DSL just disappears. New
investment changes the duopoly players but not the fact of duopoly…
Posted on May 6, 2014 | 2:01 PM Up
Small.vaffb0f4

m fish

Is there any way that the issue of net neutrality could be solved
without reclassifying Internet service providers as common carriers
under Title II?
Posted on May 6, 2014 | 1:17 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

Chairman Wheeler has proposed rules that would provide some legal
protections for network neutrality but would have an exception for
discrimination that is “commercially reasonable.” I think
Wheeler believes (and others I’ve talked to agree) that this is
probably the “strongest” network neutrality rule he could get
short of reclassification. So if you want network neutrality regulation,
your options are either Wheeler’s plan or re-classification.

Of course, there are other things policymakers can do to indirectly
protect network neutrality. For example, we could look for ways to lower
the barrier to entry for new networks like Google Fiber. The FCC could
also overrule states that have prohibited cities from building their own
municipal fiber networks. These changes could increase broadband
competition, making it easier for customers to switch if they don’t
respect network neutrality.

There might also be room for antitrust enforcement, but I haven’t
done any reporting on how practical that would be.
Posted on May 6, 2014 | 1:31 PM Up
Nilay Patel

Nilay Patel

Managing Editor of Destruction

Yes — that’s more or less what the FCC is trying to do by
threading the needle with its power to set “commercially
reasonable” terms under Section 706. But a lot of people don’t
think that’s going to work, and Title II is by far the easiest way
for neutrality advocates to get the regulations they really want, since
the path is clear and the foundational work is done — the FCC could
flip the switch essentially tomorrow.

The other options are for Congress to rework the Telecom Act, which
would take years, or if you’re really idealistic, for so much
broadband competition to suddenly erupt that neutrality regulations
aren’t even needed.
Posted on May 6, 2014 | 1:33 PM Up
Small.vaffb0f4

actuarygambler

Isn’t Comcast using it’s internet business to advance it’s
cable service (by throwing up barriers to competitors like Netflix in
the form of higher fees) a pretty clear violation of antitrust law?
Posted on May 6, 2014 | 1:24 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

I think it’s reasonable to be concerned about this kind of issue,
but I haven’t done any reporting on whether Comcast has done
anything that would cross the legal line from an antitrust perspective.
Posted on May 6, 2014 | 1:33 PM Up
Small.vaffb0f4

jasperinboston

A century ago, the Wilson administration decided not to press its
antitrust case against AT&T, allowing the firm to continue the
acquisition spree that made it a monopoly. In retrospect, that decision
looks like a mistake.

Maybe. We don’t have an alternate universe to test what things would
have been like had ATT been broken up in the 1910s, but at least the
monopoly in question was (apparently) regulated with a fair degree of
rigor, and my recollection is that the US telecommunications system was
the envy of the world for many years (unlike today’s nightmare of
high costs and slow speeds). True story: in high school (early 80s) I
had a friend from a Scandinavian country whose family had moved to the
states. Anyway, something that sticks out in my mind is their amazement
when, after ordering phone service from New England Telephone, a tech
arrived that very day! to install service. Anybody still think the US
has got Norway beat on telecommunications services in 2014?
Posted on May 6, 2014 | 1:25 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

It’s a good point. Of course, most other countries also had
monopolies during the 20th century, so it’s hard to know what a
competitive telephone market would have looked like. Thanks for the
comment!
Posted on May 6, 2014 | 1:55 PM Up
hiyawathadan

hiyawathadan

My company has recently gone from a network that runs on private T1s to
a network using our own routers to utilize existing broadband circuits,
DSL, cable, fiber services like U-verse. The trouble with Level 3 is
actually hurting our business in that we are spending more and more man
hours trying to resolve the slow-response and packet loss issues at our
locations. Our company doesn’t deal directly with Level 3, but the
last-mile providers that they service.

Will we have any legal recourse to fight this? Because these issues are
hurting a lot of business for many companies.
Posted on May 6, 2014 | 1:27 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

Thanks for commenting. I’m sorry to hear this is affecting you.

I haven’t done reporting on this specific issue, but I doubt
you’ll have too much recourse. Generally speaking, internet service
is provided on a “best effort” basis. If users aren’t
satisfied with their service the only recourse is typically to switch to
another provider.
Posted on May 6, 2014 | 1:41 PM Up
Small.vaffb0f4

likeyouropinion

Cool, there are comments. Anyway… Given the possibility that NSA knew
about Heartbleed and other vulnerabilities without disclosing them, to
what extent do the tech companies trust NSA to actually help them with
security? For that matter, what about the public? Can/should we believe
that the NSA is making the internet safer?
Posted on May 6, 2014 | 1:27 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

I think the NSA has permanently undermined any trust the public once put
in the NSA as an ally in network security. And that might actually be a
good thing. The NSA’s twin missions of securing the internet and
spying on the world have always been in conflict, and if the government
is going to help companies secure their networks, it would probably be
better to have a separate agency dedicated to that function.

There’s an analogy to immigration law here. There used to be one
agency, the Immigration and Naturalization Service, that handled both
border enforcement and immigrant service. In 2003, these functions were
separated. Today enforcement is handled by Customs and Border Protection
and Immigration and Customs Enforcement, while Citizenship and
Immigration Services provides services to immigrants. A similar split
might make sense in the internet security context.
Posted on May 6, 2014 | 1:48 PM Up
mtsw

mtsw

How much of this is about rent-seeking from Comcast and how much of it
is about protecting its cable and media business from competition from
Netflix? People in the TV industry seem extremely concerned about the
cord-cutting trend and people in the film industry also seem concerned
with Netflix offering an a lower-price-point alternative to
theater-going or video purchasing. Given how most ISPs are cable
companies and many also own media companies (Comcast-NBC-Universal being
an obvious one), is the anti-net-neutrality push more about protecting
them and cable revenues more than the rent-seeking narrative?
Posted on May 6, 2014 | 1:43 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

I don’t want to comment on Comcast’s motives, but you’re
clearly right that big cable companies have incentives to undermine
companies that could disrupt their current paid television services.
Posted on May 6, 2014 | 1:50 PM Up
Nilay Patel

Nilay Patel

Managing Editor of Destruction

For the most part cable companies have told me that they love increased
broadband usage — it costs them virtually nothing, and they can
charge higher prices, which they need to squeeze every dollar out of
their massive infrastructure investments anyway. So a company like
Comcast has many competing incentives: to protect its TV business, but
also to shift customers over to a higher-margin service like broadband
where it can charge both customers and content providers like Netflix,
instead of just having to pay TV retransmission fees to companies like
CBS. It is insanely complicated. At least the lawyers are happy.
Posted on May 6, 2014 | 2:13 PM Up
Kevin Pedro

Kevin Pedro

I’ve read a lot about the FCC’s options in regulating the
Internet. It’s never been quite clear to me what real negative
consequences would occur if they reclassified the ISPs as common
carriers. They have the power to do this right now, correct? Do they
just fear lobbying and legislative efforts to reverse the
classification?
Posted on May 6, 2014 | 1:54 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

I think a big part of it is political. The last time the FCC considered
reclassification, they got an earful from members of Congress, including
several dozen Democrats. Reclassification would set off a big political
fight, which Wheeler might not have the stomach for.

There are a couple of other considerations as well. One, although most
people think the FCC would win a reclassification fight in court,
it’s not a question the courts have ruled on yet. So it might lead
to a few more years of litigation before the FCC’s authority becomes
clear. Wheeler wants to get rules on the books right away, and he thinks
that staying within the bounds of this year’s DC Circuit opinion is
the quickest way to get there.

Finally, there some danger that re-classification would trigger too much
regulation. The law imposes a number of legal requirements on broadband
providers, and some of them are things that even supporters of network
neutrality would be counterproductive. The FCC does have the option of
“forbearance,” to choose not to enforce particular provisions of
the law. But the extent of the forbearance power might itself be the
subject of litigation, and in any event working through those issues
could clog up the FCC’s docket.
Posted on May 6, 2014 | 2:00 PM Up
burritojustice

burritojustice

Could a state pass its own Net Neutrality legislation?
Posted on May 6, 2014 | 1:57 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

I haven’t checked into this specifically but in many cases state
regulation of broadband services is preempted by federal law. So a state
that tried to pass its own net neutrality bill might have to deal with a
lawsuit arguing that federal law doesn’t allow it.
Posted on May 6, 2014 | 2:01 PM Up
Small.vaffb0f4

jwier85

What is the argument against line-sharing? From my, admittedly limited,
perspective, it seems like it would force Comcast and others to compete
with smaller companies for market share and reduce their ability to
influence transit services.
Posted on May 6, 2014 | 2:02 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

I’ve talked to people in Europe who argue it works well there. I
think there are a couple of related reasons it would be hard to bring
back in the US.

The basic problem with line-sharing is that it only works well if the
incumbent carriers cooperate. If the local telco is determined to
prevent line-sharing from working, they can drag their feet and make the
service so terrible that nobody wants to take advantage of it. One
solution is to “structural separation,” which means limiting the
incumbent to only provide wholesale access, but that could be disruptive
in a market where millions of people are already signed up for service
with the incumbents.

The other problem is that line-sharing requires new entrants to trust
that the FCC will actually enforce the line-sharing rules over the long
run. Otherwise, they could invest a bunch of money building a broadband
business only to have it evaporate if the FCC changes its mind and
cancels the program. That’s basically what happened in the early
2000s. And that history would make companies extra gunshy if the FCC
ever tried to bring the program back—especially since a Republican
might get elected president in 2016 and appoint anti-line-sharing
commissioners.

So line-sharing is a theoretical possibility, and it might be a good
option in the long run. But I’m not sure the current FCC would have
the political capital to pull it off.
Posted on May 6, 2014 | 2:16 PM Up
Small.vaffb0f4

tialaramex

The UK has all three tiers of competition. In urban areas with cable TV
they can choose a triple play option from Virgin Media the cable TV
company. or they can get broadband with a regular telephone line. But
then, having chosen the second option, they can choose to get service
from BT (once British Telecom) the old incumbent monopoly, or from a
rival like Talk Talk which BT’s infrastructure subsidiary is
required to allow to share their last mile phone infrastructure from its
own equipment in larger towns or cities. Finally, even if their service
comes over BT’s equipment (whether because they preferred that or
because they were in a rural area where BT are the only option) they can
choose from a number of ISPs including BT’s own retail ISP, all
buying the same underlying last mile service as BT retail from BT’s
infrastructure subsidiary with a regulated price structure.
Despite all these opportunities to choose anyone but the old monopoly
BT, they do remain the biggest ISP in the country. But customers have a
real choice, and that might be just enough to keep things competitive.
Interestingly the competition is not a simple race to the bottom either.
There are budget ISPs cutting corners to offer a lower price, but there
are also premium ISPs offering a better service than BT for a higher
price.
Posted on May 6, 2014 | 3:06 PM Up
Timothy B. Lee

Timothy B. Lee

Senior editor

One other issue with line-sharing is that I think there are legitimate
concerns about deterring investment in new infrastructure. It’s easy
to force incumbents to share lines they already have. It’s harder to
force them to share cables that don’t exist yet. And in many parts
of the country we need new fiber optic cables. So line-sharing would
risk freezing our current fairly slow infrastructure in place.
Posted on May 6, 2014 | 2:40 PM Up
geoffrey.harden

geoffrey.harden

Could the U.S. net neutrality debate have political or infrastructure
ramifications on foreign countries? Whether it be how foreign countries
access U.S. based services, or how foreign ISPs treat traffic in their
own country?
Posted on May 6, 2014 | 2:02 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

Most of my reporting suggests that other developed countries have more
competitive broadband markets, which makes this kind of thing less of a
concern. So I don’t think European consumers have too much to worry
about.

The thing to remember is that the internet is highly competitive on the
“content” side of the market. So a Brit downloading content from
an American web server shouldn’t have any problems. It’s only
the “eyeball” side of the network that has competition problems,
so only American consumers are directly affected.
Posted on May 6, 2014 | 2:19 PM Up
Thomas Barnet-Lamb

Thomas Barnet-Lamb

Would it be possible for a state to pass legislation mandating local
loop un-bundling? Or is that federally pre-empted too? It seems like
requiring that local broadband markets be genuinely competitive would be
a long-term solution here.
Posted on May 6, 2014 | 2:07 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

Again you’d have to ask a lawyer for the definitive answer but I
would expect only the feds can require local loop unbundling. I actually
think a good compromise would be for federal policymakers to leave more
of these issues up to the states and then let states experiment. Texas
could take a highly deregulatory approach, Massachusetts could try
unbundling, Vermont could try a state-run broadband network, etc. Then
maybe we’d learn which approach works the best and other states
could copy the approaches that get the best results.

One potential problem, though, is that broadband companies are so big
that they span many states. So these companies could punish states that
try unfavorable policies by starving them of investment. Still, I think
we could learn a lot from more federalism.
Posted on May 6, 2014 | 2:22 PM Up
Small.vaffb0f4

communitynets

The determining case in unbundling is the BrandX decision. FYI
Posted on May 6, 2014 | 2:28 PM Up
Timothy B. Lee

Timothy B. Lee

Senior editor

Brand X said that the FCC was allowed to end the unbundling program. But
it didn’t require the FCC to end unbundling, and I don’t think
it said anything about preempting states.
Posted on May 6, 2014 | 2:31 PM Up
donsense1

donsense1

An open accessible internet, available to everyone is the only way to
go. Who in D.C. supports the Comcast / Time Warner merger? What are
their reasons? Sounds like a difficult position to take. I would expect
the majority of the country would favor cheap or even free internet
access.
Posted on May 6, 2014 | 2:14 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

I don’t think very many people (other than the companies’
lobbyists) are actively supporting the merger, but there are a fair
number of people who just don’t see it as a big problem. A major
talking point in favor of the merger is that Comcast and TWC don’t
directly compete with each other, so merging them won’t reduce
competition. I think that has convinced some people who are skeptical of
antitrust-type enforcement more generally.
Posted on May 6, 2014 | 2:24 PM Up
Small.vaffb0f4

Matthew Durst

The Internet is only as fast as the slowest connection. When I order
Internet from an isp (ie Comcast) they own the level 2 “pipe”
from my house to their data center. Who originally paid for the
connection between the isp center and the level 3 providers? Does the
fact that some data generators directly link into level 3 decrease the
historic flow of money to the center, making fewer options for level 2
isps to siphon fees?
Posted on May 6, 2014 | 2:18 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

I’m not sure I understand the question. The fees between ISPs and
transit providers have traditionally been negotiated in a market
environment. That’s still true, but the ISPs have started to have
enough leverage to make the cash flow toward them.
Posted on May 6, 2014 | 2:26 PM Up
tiredboredblog

tiredboredblog

I know we can only speculate on Comcast’s motives, but it seems
clear that since both internet and television are largely delivered
through the same "pipes", and since video traffic takes up a relatively
large portion of what is coming through, that the long-term play for
Comcast is to leverage its size to be able to dictate the next
generation of "TV". Cable and streaming are slowly coming together and
there will be a new format in the near future. While the issue today is
net neutrality I think the real issue is how video content is delivered
to our devices (including our TVs). In the absence of a sudden change in
wireless delivery or un-bundling, the big ISPs/cable companies have all
the power. I live in Brooklyn and only have one choice for cable (TWC)
and no choice for fiber. In the short-term there is no competition.

At what point does the poor customer experience and lack of options
force the government to react? Or should we give up given that we still
hear naive ideas from Congress like cable a la carte? (Is our government
incapable of understanding the issue well enough to make a good
decision?)
Posted on May 6, 2014 | 2:20 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

I think public knowledge can be really significant on an issue like
this. Lots of people dislike their cable company, but most of them
don’t know enough about the details of telecom policy to pressure
policymakers to do anything specific about it. If the public rallied
around a specific regulatory approach, Congress and the FCC might feel
more pressure to enact it. But so far peoples’ general
dissatisfaction hasn’t been translated into any specific proposal.

I do think that the chances of the FCC blocking the Comcast/TWC merger
is higher than other actions. It’s pretty easy for the public to
understand what a merger is and why it could be bad for consumers. So
the public might exert a lot of pressure on the FCC on this issue. But
it’s much harder for the public to know if a proposed FCC regulation
is a good thing or a bad thing, so public opinion tends to matter less.
Posted on May 6, 2014 | 2:30 PM Up
tiredboredblog

tiredboredblog

Do you think the question of who pays for upgrading the connections is a
red herring, that if the issue was settled then Comcast and the other
big ISPs would just figure out new ways to throttle specific traffic?
Posted on May 6, 2014 | 2:33 PM Up
Timothy B. Lee

Timothy B. Lee

Senior editor

I don’t think it’s a red herring. Comcast has insisted that it
hasn’t throttled anyone’s traffic, and I think that has been
essential to their PR strategy. If they started deliberately throttling
specific traffic, I think that would create a huge PR backlash that
would ultimately lead to bad outcomes for them.
Posted on May 6, 2014 | 2:36 PM Up
tiredboredblog

tiredboredblog

My point is that there must be other ways to throttle while appearing to
be concerned about another issue, like upload and download traffic in
this case. I assume Comcast has its next argument already lined up in
case the upgrade issue is resolved. Or maybe I’m too cynical.
Posted on May 6, 2014 | 2:38 PM Up
Small.vaffb0f4

a_w_forbes

I would appreciate the FCC enforcing strict net neutral policy, but I
don’t think this is enough. ISPs such as Comcast have a long history
of creative ways of sidestepping the spirit of such rules. (e.g.
discrimination against customer requested torrent traffic is just normal
“network management”, their current stance on paid peering) As
such, the only long term solution I can see is more competition among
broadband providers.

If Internet service is a “natural monopoly” then local loop
unbundling seems to be the only way to create competition. On the other
hand, it seems sound policy to avoid unbundling regulation if
competition can be created some other way. Do you see any way forward to
a net neutral internet without breaking up last-mile monopolies?
Posted on May 6, 2014 | 2:34 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

I’m honestly not sure! It’s a complicated issue and frankly all
of the options seem bad to me. But I think it’s probably true that
it’s not going to be possible to fix the problem as long as the
market is dominated by a few large ISPs, so some kind of structural
changes are probably needed.
Posted on May 6, 2014 | 2:38 PM Up
nathanreid

nathanreid

I know that the 1st Amendment has been used as an argument by both
Verizon and Comcast in their court cases against the FCC, but does the
FCC have any 1st Amendment arguments when arguing for the use of Net
Neutrality?
Posted on May 6, 2014 | 2:53 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

Some people have talked about network neutrality as the “First
Amendment of the internet,” and I think some academics have proposed
taking that analogy literally. But I don’t think the FCC has tried
to use that argument in court. I don’t think Verizon has made much
headway in invoking the First Amendment either.
Posted on May 6, 2014 | 2:55 PM Up
nathanreid

nathanreid

I have been searching for the specific dollar amount that Netflix has
paid both Comcast and Verizon but have not had any luck finding. Do you
have any information on that or possible estimation on how large of a
deal this is for those companies?
Posted on May 6, 2014 | 2:57 PM Up
Timothy B. Lee

Timothy B. Lee

Senior editor

I don’t know the specific dollar amounts, but my reporting suggests
that they’re relatively small. Dan Rayburn suggests that they’re
in the ballpark of $10 to $20 million, which seems plausible to me.
That’s a lot of money for most people, but at Netflix and
Comcast’s scale, it’s not a huge deal.
Posted on May 6, 2014 | 3:11 PM Up
tiredboredblog

tiredboredblog

Do we know the five parties with whom Level 3 is having peering issues?
I assume Comcast, TWC, Cox, Charter and someone else.
Posted on May 6, 2014 | 3:01 PM
Timothy B. Lee

Timothy B. Lee

Senior editor

We don’t. I asked but they declined to say.
Posted on May 6, 2014 | 3:05 PM Up
Small.vaffb0f4

sleeplessinva

The simple question to ask ourselves is what our public roads and
highway systems would look like if they were managed and built by the
likes of Comcast, AT&T, and Verizon? On top of buying a car, would each
company charge everyone an access fee to drive on these roads? What
happens when we cross state lines? Would we need to pay the fees/tolls
when we drive from one set of roads to another? With WalMart, Target,
and every other supermarket chains that have big trucks on these roads,
would they need to pay more or would Comcast, AT&T, Verizon, and the
likes build a special set of roads for anyone that wishes to pay that do
not get clogged on regular highways because they would be too clogged
up. Would that be net neutral? Or is that just a nice way to say some
entities are more equal than others….?
Posted on May 6, 2014 | 3:10 PM

  1. 2014-05-01 From: "Paul Robert Marino" <prmarino1-at-gmail.com> Subject: [NYLXS - HANGOUT] Nostalgia in the office
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  3. 2014-05-05 Ruben Safir <mrbrklyn-at-panix.com> Subject: [NYLXS - HANGOUT] not covered
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  8. 2014-05-06 Ron Guerin <ron-at-vnetworx.net> Re: [NYLXS - HANGOUT] making a buck
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  14. 2014-05-06 Ruben Safir <mrbrklyn-at-panix.com> Re: [NYLXS - HANGOUT] Fwd: Net neutrality emergency
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  27. 2014-05-19 Elfen Magix <elfen_magix-at-yahoo.com> Re: [NYLXS - HANGOUT] Summer Activitie
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  32. 2014-05-20 Ruben Safir <mrbrklyn-at-panix.com> Subject: [NYLXS - HANGOUT] Perhaps the most important tv journalism of our lifetime
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  36. 2014-05-27 Contrarian <adrba-at-nyct.net> Subject: [NYLXS - HANGOUT] no gcc on this SUSE install
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