Comcast is threatening to cut off Netflix streaming unless an Internet backbone provider, Level 3, agrees to pay it money. Comcast is quickly turning into the poster boy for Network Neutrality, and in the process, it is highlighting the inefficiencies and pitfalls of solely relying on markets to self-regulate.
The Highway System
A common analogy for the internet is that it is like the highway system. Computers are the houses, and each house has a street address, aka an IP address. Your internet service provider (ISP) is analogous to the roads that you drive on. If your destination is far away, you may find yourself leaving the roads of your ISP to travel along highways, or Internet backbone providers, that link to other ISP’s. It’s a good analogy, and pretty easy to understand.
The highway system analogy breaks down when you get into peering issues like Comcast and Level 3 are currently experiencing. Our road system is essentially owned and run by the government. No one can tell you which roads you can and cannot drive down. The roads are for everyone.
You Can’t Get There From Here
The internet doesn’t work like a government managed network of roads. Each ISP owns its own roads, and no one actually requires them to talk to each other. In order to reach sites hosted by other ISP’s, you are relying on your ISP to have peering relationships with other network providers. If you are lucky, your ISP will have a direct peering relationship with the place that you are trying to go, and your route will take you just a few short hops. If not, you will have to travel through one or more intermediate ISP’s in order to get to your destination.
These kinds of peering relationships between ISP’s can have significant performance impacts. Two servers in the same local region could require a very long, circuitous route to talk to each other. If the ISPs are not peered, you need to follow a trail of peers’ peers, or peers’ peers’ peers, etc., to find a path, and this might be half a world away. I once encountered an ISP in Singapore and an ISP in Australia, and the fastest path between their networks was to go via Los Angeles.
Is the Market Failing the Consumer?
Many people point to the internet peering system as an example of private market solutions providing more efficient solutions than the government could. No one is forcing the ISP’s to peer with each other. But if their users cannot access the internet, the ISP won’t have any customers, so they do it on their own. Consumers win.
In the case of Comcast and Layer 3, the market shows signs of needing some regulation. Comcast isn’t trying to reject all Level 3 traffic, just the video traffic. While in theory it should be in Comcast’s self interest to carry all of the internet traffic that its customers want, video traffic shifts the equation. Comcast’s main business is selling video content through cable television and video on demand (VOD). Any time Comcast’s customers are watching video on the internet, it means that customers are not consuming Comcast’s video services. This means a loss of VOD revenue and potentially a loss of cable television subscriptions altogether. Charging extra for video traffic becomes a counterbalance to the potential loss of revenue.
Returning to the highway analogy for a moment, you don’t really have the right to travel on any road you want. Some highways are toll highways, and you have to pay to use them. Some roads are restricted to certain vehicle types (e.g. “No Trucks”). If you don’t want to pay or you are the wrong type of vehicle, find a different route. Why isn’t Comcast’s decision just like restricted roads?
The difference is that Comcast controls the only road to your house. Changing ISP’s is a major hassle, and in many communities, there are only one or two high speed internet providers available. If Comcast shuts off Level 3 video traffic, consumers cannot just click a button to take their business elsewhere.
If ever there was an argument for Net Neutrality, this is it. When Comcast was going after bit torrent, a lot of people got hot and bothered. However, bit torrent is not a mainstream technology, and much of the content being transferred over it is of, um, questionable origin. Netflix content reflects legitimately licensed content that consumers are paying for.
Someone needs to be looking out for us. Clearly, Comcast interests are not aligned with those of its customers.