
Huge ISPs want per-GB payments from Netflix, YouTube - abraham
http://arstechnica.com/tech-policy/news/2011/01/huge-isps-want-per-gb-payments-from-netflix-youtube.ars
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johngalt
"freeriding" is a ridiculous concept. How about we call what the ISPs do
"middlemanning".

Why would someone pay for internet from an ISP if not to access these types of
services? You think we pay $60/month just to have an IP address?
Fundamentally, customers wouldn't pay for broadband if it weren't for these
"bandwidth hogging" applications. So who's stealing value here?

If you don't want to peer fine, pay your upstream provider's transit rates. Or
better yet cut off service to any webpage that requires more than 100kb to
load. I'm sure your customers will be happy to keep paying you for nothing.

~~~
sagarm
How about "rent-seeking"?

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blhack
Copy/pasting this from thingist, but:

"We're trying to have a society over here."

Imagine this for a moment: You just purchased a new microwave and would like
to plug it in on your countertop and cook a delicious burrito, but you can't.
Why can't you? Because the power company only allows you enough power to run a
small coffee maker, or maybe a rice cooker, or maybe a toaster, but none of
these things at the same time.

This is the internet, and it is horrible.

Now imagine that General Electric, who makes the microwave, also owns the
power company. They have decided that only GE branded appliances will work
properly on _their_ power distribution network. You can have a toaster, but if
you have a GE microwave, the toaster will only toast things like 10% (because
the GE microwave gets priority, you see), and won't work at all for bagels.
Now imagine that Westinghouse, who manufactures your toaster, actually _pays_
GE to transmit the power to your house. Would this make you angry?

This is net neutrality.

Howabout this! You purchase 10,000 gallons of water from your city. The city
enjoys selling you these gallons, but they decide that you are only allowed to
use them in the shower. If you want to use some of those 10,000 gallons in the
dishwasher...wellllll, you're going to have to spend an extra $30/mo for the
privilege.

This is AT&T, and this is internet on cellphones.

This is _insane_ , and this is stifling innovation.

ISPs and telcos, we're trying to have a society over here, would you please
get with the program?

Why is this nonsense tolerated? In the past we've gotten together as a
civilization and realized that certain things are important to our continued
development. Schools, for instance, were recognized as important because it's
important to have an educated population. The interstate system was recognized
as a hugely important economic driving force because it allowed people to
quickly move around. The rail system was recognized as important because it
meant that we could move goods.

Why haven't we gotten together (well, _we_ have, geeks have) and decided that
having un-meterd fiber to every home in the United States is an enormously
important piece of our future success as an economy?

How awesome would it be if I could build a (albeit crappy [because I don't
have generators and flywheels]) datacenter in my house? I want to build
$really_cool_app...so I just _do_ it. This is freaking _possible_. The
incremental cost of transmitting bits is almost nothing. Why aren't we making
this happen?

By the way, US lawmakers, other countries _are_ making this happen.

~~~
mayank
If we're on analogies, this is like the USPS deciding in the early 2000s that
you have to pay to receive mail as well as to send it. eBay and Amazon have
just made it big and resulted in a massive increase in package deliveries, so
USPS decides to double-dip and get a slice of the Internet pie.

Also, the cost of postage does not go down -- their revenues just go up.

~~~
protomyth
Yep, except you have to add FedEx, UPS, etc. won't carry your packages because
they don't serve your area.

~~~
_delirium
That used to be the case, and was one of the things the USPS used to complain
about--- they were legally mandated to deliver to every valid postal address
in the U.S., while UPS and FedEx could exclude unprofitable remote areas. It
appears both UPS and FedEx now promise delivery to every U.S. address; would
be curious to know when that happened. They do, unlike the USPS, levy a
surcharge for delivery to areas deemed "remote", though.

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cletus
Frankly this double-dipping whining coming from ISPs--which is nothing new--
annoys the hell out of me.

Customers pay for a net connection and some amount of bandwidth. What they do
with that bandwidth is up to them.

The idea that the servers that customer uses _must pay for that bandwidth
again_ is ludicrous.

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fleitz
It's a lame argument. Since the advent of Netflix and YouTube most ISPs have
increased their connection speed. If it's costing them too much money simply
stop increasing the connection speeds. YouTube didn't decide to give everyone
10 Mbps connections, why are the ISPs surprised that now that customers have
that speed that their using it.

Netflix / Youtube cost ISPs little compared to BitTorrent.

~~~
cookiecaper
As I stated in a comment on another thread yesterday, and in support of a
sibling comment, my experience is that Netflix is often twice as much traffic
as running BitTorrent all day.

~~~
fleitz
Netflix doesn't tend to use upstream bandwidth. If you look at bandwidth
contention in the last mile it's all upstream. Thankfully, with SYN/ACK
prioritization it's become less of an issue.

~~~
cookiecaper
Well, I guess if the issue is only on upstream bandwidth, they should 1)
increase the upstream rates, which are (afaik, not a phone line engineer guy)
arbitrarily limited and 2) only bill upstream bandwidth usage.

The majority of immediate BT traffic is downstream too, it just has a very
long tail of upstream. It can take months to get a 1:1 ratio on a download
that occurred over an hour or less sometimes.

I think providers are just going to have to come to terms with the fact that
consumers are demanding _good_ access now instead of the crap they've been
getting. We need reasonable speeds up and down, reasonable bandwidth
limitations, and reasonably-priced solutions.

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rfugger
ISPs will lose this argument, and not because governments will necessarily ban
them from charging content providers, but because if they try, the content
providers will just cut them off. Users care more about Netflix and Youtube
than they do about who provides the pipe to their home, and they'll switch in
droves once they can't access Youtube anymore. Content providers are in the
position of power here.

~~~
blhack
This is impossible, I'm sorry.

Maybe a couple of cities in the US have more than one broadband provider, but
most of us only have one choice. If netflix decided to cut off cox
communications as well as qwest, I would be SOL.

~~~
borism
_most of us only have one choice... decided to cut off cox communications as
well as qwest_

I count two choices here?

~~~
pyre
Most places in the US only have two major providers. The regional monopolies
on telephone service and cable tv service have extended themselves to DSL and
Cable Internet, respectively. On the whole, it translates to a handful of
companies nation-wide which have regional monopolies on either the last-mile
coax or phone lines to customers.

Companies like: Qwest, Comcast, Cox, Timer-Warner, Verizon, AT&T

In general, _all_ of these big players are playing the same angles. So if the
two big players in my area are Qwest and Comcast, and both of them are trying
to play hardball with Netflix, then where does the consumer turn when Netflix
cuts off access to both of them? Well, both Qwest and Comcast will gladly step
up to plate with their own Netflix-like offering that isn't of the same
quality, but 'good enough' for most consumers who just can't be bothered to
try and seek out a better experience (they would rather just gripe about it,
but put up with it). This is the same thing that happened with PVRs and TiVo.
Most of the cable companies went to lengths to shut out TiVo and delay things
like CableCard 2.0 as much as possible while rolling out their own solutions
and pricing them into existing service packages.

~~~
ams6110
TV/Internet services compete heavily. Here it is ATT and Comcast (though in my
particular neighborhood ATT doesn't offer DSL yet). If Comcast were to push
Netflix to the point where Netflix cut them off, the BOOM mass migration of
consumers to ATT. And vice versa. I think the temptation to convert another
provider's customer would be too strong for the provider to withstand.

So your are really only SOL if you have only one choice. In which case I'd
prefer to do without. Except for Netflix, I could do most of my other online
activities fairly well over dial-up.

~~~
neutronicus
I think you're wrong - if Netflix users are costing Comcast too much, Comcast
would rub its hands together and cackle with glee if they all became AT&T's
problem (while Grandma who writes an e-mail a week and looks at pictures of
her grandkids doesn't bother switching).

------
Mikushi
What those European ISP suggest is simply outrageous, those service already
pay an insane amount of money to serve their traffic, i don't see a valid
reason to double bill them.

At 0.037euros/GB the money involved would be just insane, if i take the
numbers from one of the website i manage, at this rate, to serve Italia,
France, Germany and Spain, it would cost, at 3.7c/Gb as suggested, 1.3Meuros
roughly... Might as well shutdown the site as we would make no money out of
it.

Between that, and the Canada CRTC madness, it is really not a good time to be
a content provider.

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exit
so how about data as a public utility? there's no competition up there anyway.
why not let the cartel we ostensibly empower handle it instead?

~~~
philwelch
After what happened in Egypt, I wouldn't want to entrust the government (even
the city government!) with the responsibility of keeping the internet on; that
only enables them to more easily turn it off.

~~~
JoachimSchipper
It's not like Egypt had trouble shutting down its ISPs.

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aeontech
Aren't there laws in place against what amounts to collusion for price-fixing?
I thought that the laws of free market should make services cheaper over time,
as infrastructure capacity and competition grows... instead, it seems like the
competition is shrinking and there is a bare-faced money grab happening.

------
amalcon
Say you run a server in a datacenter. You pay (for example) Level 3 for
connectivity. What you're actually paying Level 3 for is the service of
delivering packets to your end-users. If they don't do that, you'll buy your
connectivity from someone else. There are plenty of players in the
"connectivity to datacenters" market. Well, they're dominated by a dozen or
so, and it's a bit of an old boys' club, but at least you have options.

Now, say you're Level 3. You want people to pay you to deliver packets to end-
users. In order to convince them to do that, you need to be able to deliver
packets to end-users. In order to do that, you need to have a traffic exchange
agreement with (say) Comcast, who has the end-users.

That agreement will have some terms. Those terms might be that Level 3 pays
Comcast (certainly not), they might be that Comcast pays Level 3 (probably
not), or they might be that they exchange traffic for free (most likely). The
terms you end up with are determined by the negotiation, which means that it's
dependent on who has the most to lose by not exchanging the bits at all. Right
now, with those two, either would basically collapse under its own weight
without connectivity to the other, so it's probably peering (free traffic
exchange).

Now, say you're Comcast. Your end-users are driving a _huge_ relative amount
of traffic from (say) Netflix. It's pretty expensive for you to maintain that,
and it's eating into your profit margins quite a bit, because it's coming
through Level 3 (hence free). You can't convince Level 3 to pay you for it,
because if you stopped exchanging traffic, your users wouldn't be able to get
to Google, Facebook, Wikipedia, the VPN to the office, and other low-bit,
high-value endpoints, and then they would stop paying you. So, how do you make
those costs scale?

The simplest solution is just to raise your prices. This would work very well
for end-users who want to use Netflix, but your highest margins come from the
end-users who basically only use e-mail, a little Facebook, and occasionally
look something up on Wikipedia. That is, you get the best margins from people
who use the least. They are also the most likely to jump ship (maybe skipping
connectivity entirely) when faced with a price increase.

You could adopt metered pricing, where you pay depending on how much you
actually use. It's similar to the model back in Ye Olden Days, where you paid
per hour of usage, except updated for an always-on world. I think this is
where it is ultimately headed, but it is extremely unpalatable to current
markets. People like the certainty of a regular monthly bill with a fixed
number on it.

Because those options carry severe disadvantages, ISPs are trying to get
creative. Fortunately for them, last-mile eyeball ISPs generally don't have
the competition that the big networks have. The end user has three choices, if
they're lucky: the phone company, the cable company, and Clear. Many only have
two, most only have one, and all of them are facing the same choices.

What this means is that they can threaten to cut off (or de-prioritize into
the ground) access to Netflix specifically. This is actually a credible
threat, because Comcast would keep on going just fine without tying in with
Netflix. Their most profitable users don't even use it, and the others would
probably lose Netflix anyway if they jumped ship!

This gives them two more options. They can threaten end-users, and ask people
who want to use Netflix to pay more. The end-users don't like this, but the
most profitable ones weren't using it anyway. This is the last way of drawing
on the existing revenue stream.

The other option is to threaten Netflix. This is what they prefer, basically
because it's the only way that does not involve upsetting your existing
customers. It's also a fairly sensible model: essentially, Netflix is paying
(some of the cost of) both ends of the connection and passing the cost on,
where previously end-users were paying for their end. This model is sort of
like broadcast television: the end-user doesn't actually pay for it; the
broadcaster pays for both ends.

The problem is not with the fundamentals of the model, but with the logistics
and the precedent. If Netflix is paying at both ends, why not Google? Or
Hacker News? Or your blog? What about your VPN to your office? What about when
you ssh (or scp a large file) to your computer sitting at home? Who pays if
you connect directly to your friend to play a game?

On the logistical side of things, the problem is basically that there are a
lot of ISPs. You _must_ verify your bills for all of them, because it would be
really easy to commit fraud this way. Netflix might be able to process monthly
bills from all of them, but can Bob's video site? Can your blog? You might
outsource this processing, but that just pushes the problem up a level, since
Level 3 now needs to process (and confirm numbers for) bills for their
customers cross all the ISPs in the world.

If you'll forgive me this, the cost of processing bills goes from O(n+m) to
O(n*m), where n=number of ISPs and m=number of server-owners. Ask any
complexity theorist: that's bad, and in the long run, it will only get worse.

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jschuur
What I don't understand is why ISPs are giving their content providing
customers fixed rate access. From the article: "In both cases these charges
are generally flat fees, not linked with usage..."

This doesn't sound like double dipping at all. Why should Netflix not be
charged more based on how many resources are used? I do at Linode and
DreamHost.

I guess the real question is what about other ISPs that Netflix's ISPs connect
to? How do they get reimbursed by traffic over their lines, when one of their
customers access Netflix? Do peering agreements not accurately work that out?

~~~
wmf
The article is confusingly worded: "Most Online Service Providers pay their
Connectivity Provider(s) to be connected to the Internet, which is generally
_based on the bandwidth they require_... In both cases these charges are
generally flat fees, not linked with usage..." So a content company may pay a
"flat fee" _per 10 Gbps port_ , but of course the number of ports they use is
proportional to their peak hour traffic, so essentially they are paying per
Gbps.

~~~
jschuur
Well in that case, I find it hard to have sympathy for the ISPs wanting to
make even more money.

Their bandwidth charges should be equal to their own costs, plus a little room
for profits. A little.

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shaggy
Until the companies that are providing and delivering the content grow spines
and tell the big ISPs to shove it, the big ISPs will get their way. Combine
that with consumers taking action and canceling their internet service and
maybe the poor multi-billion dollar per QUARTER companies will listen.

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Natsu
This is the exact issue that Net Neutrality was formed to fight (though
lobbyists have intervened since then). Nobody except for the people who will
profit from it want this.

Today, Netflix, tomorrow, everyone.

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VladRussian
at first thought the fight seems to be about about greedy ISPs wanting to be
double-payed.

At the second thought - it is about power and control over Internet. Right now
ISPs should accept whatever is dumped into their pipes. They are just common
carriers. Given the right to charge content providers for carrying the
providers' traffic, they can just pick and choose whose traffic at which price
and whether to carry it at all.

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zacharycohn
I would go along with this if there was some provision that required the
companies to use the extra $/gigabyte for expanding their infrastructure.

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aspir
The page is down. Ironic :)

Does anyone have a cached version?

~~~
mrkurt
I sure hope it's not down! Otherwise the Hacker News monitoring system is
doing a better job than all of our existing ones.

~~~
benologist
Down for me too.

Just kidding.

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ecounysis
This sounds reasonable to me.

