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Senator Al Franken: No joke, Comcast trying to whack Netflix (arstechnica.com)
157 points by shawndumas on Jan 19, 2011 | hide | past | web | favorite | 61 comments

Level 3 did a great job spinning this into public outrage. Here's what actually happened:

1. Level3 started offering CDN services. By leveraging their existing peering relationships (as a tier 1 ISP) they could essentially subsidize the transit costs of the CDN business, compared to e.g. Akamai which had been paying Comcast for peering to reach Comcast customers.

2. Netflix got a good offer for CDN services from Level3, and switched a bunch of their content from Akamai to Level3's CDN.

3. Comcast therefore saw a bunch of paid traffic turn into unpaid traffic overnight, and complained.

This is a business dispute between two self-interested parties. Is it really fair for Level3 to use their position in the ISP business to undercut competitors in a new CDN business? Was it fair a few years ago when Akamai caved and agreed to pay Comcast for peering? Will it be fair for Comcast to use a newly acquired media property to exact revenge on Netflix/Level3?

The problem with Network Neutrality is that it takes a complex issue, the product of many complex business relationships, and frames it in a black-or-white context. The history here is complicated, and the only thing I'm sure of is that everyone's a bad guy sometimes.

The problem with Network Neutrality is that it's very easy to see the development of a monopoly/oligopoly that will have near complete control of the world's most valuable man-made resource.

When it comes to the corporate behavior, only the most cynical predictions have been at all reliable. Those sanguine about the result of absolute freedom-of-action by internet providers clearly have little sense of history.

God forbid that internet access become a relatively unprofitable commodity rather than an utterly complicated, multi-tiered service in which profit is extracted through the creation of an artificial shortage.

I don't understand why the Internet is not government controlled. Would you leave road maintenance to private companies? How about air traffic, or sewers or water? The Internet is as important, if not more important (in a Constitutional way) than these services, but we leave it in the hands of self-interested parties.

The difference between these and the internet is right of way and externalities. That is, the government is involved in roads and sewers because (1) you can't have a road network in most places without the ability to forcibly purchase small strips of land from lots of people and (2) until recently, there was no efficient way to charge usage fees in a reasonable way. The internet doesn't really have that problem: charging is quite simple and the flexibility of routing means we're not nearly so beholden to any one set of property owners.

Now, I think there might be a case made for making last mile internet either municipally run or a heavily regulated business in the same way that water/power/sewer service in cities is, but that's a very different argument.

Ideally, the last mile fiber would be divorced from the IP connectivity to the rest of the world, so that a residence would pay the same money to use that last mile fiber whether they're running 1 megabit or 1 gigabit. If you then had real competition for options from your central office to the rest of the world, you'd see performance for a given price increase dramatically.

This is basically how things are done in Sweden, at least outside the major cities. A municipality builds and runs fiber to every home, residents choose from a number of different ISPs and each ISP pays a flat rate to the municipality for each active subscriber they have. ISPs can then offer any type of service within reasonable limits. This means that I can get for example 100 Mbps service and VoIP for ~25 dollars a month, or 10 Mbps for 15.

I think that you're exactly wrong on this. It makes sense for government to build roads because, for one thing, it's physically infeasible to have multiple sets of road-builders competing with each other. There is finite land.

On the other hand, it's quite feasible to have many competing internet providers. I'd say we have too few, actually, and that government makes it worse. The airways should be more open and whatever infrastructure the public subsidizes (telephone wires, etc) should be equally available to all ISPs.

More competition is the key here, not a government monopoly. All we need the government for is ground rules to make the game fair.

It certainly is more so in some countries like China and North Korea and look how that's going. Government's aren't always benevolent, they have their own agendas too that may not match some people's expectations of online freedom for one thing, and it's not like government's don't also increasingly have business interests in part influencing them. There are a lot of lobbyists these days...

Actually if it becomes unprofitable then there will be little incentive to invest in it and it will languish for years. I'm all for net neutrality but I'm also for corporate profitability. If not for the high margins FIOS and the like bring in, then there wouldn't be a decent internet option in my neck of the woods.

How many people have FIOS? Where I'm sitting our costs haven't changed in 5 years, and our bandwidth has held steady.

Where I was sitting last year, costs haven't changed in 8 years and bandwidth has held steady. I'd say those eight years are the norm, and FIOS is something of an exception.

By "relatively unprofitable" I meant "just profitable enough". When the a product becomes commoditized the market for it becomes (much more) efficient, and thus only minimally profitable, because the principal goal of the actors within it is cost reduction.

If internet access becomes a commodity it is _great_ for consumers (c.f. computer memory, public water, electricity, undifferentiated agricultural products) but horrible for the providers/producers.

Thus, somewhat ironically, the only incentives corporate lobbyists have to advocate for free-er markets is in order to maintain market inefficiencies or to reduce their supplier's margins.

I thought Network Neutrality was about restricting what businesses could do? In any other nation I would absolutely say the government should just own the internet. In the US I'm a bit more cautious but I agree that companies can't be given free reign.

Akamai was arguably paying Comcast for carrying their transit traffic. But they never should have been paying for traffic with a final destination in Comcast's network (peering traffic).

As a Tier 1 ISP, Level3 does not require Comcast to carry any transit traffic for it. If Level3 has to pay to deliver traffic that Comcast's customers themselves have requested, Comcast is clearly charging Level3 (and by extension, Netflix) for access to the customers on their network. If Comcast broke off its peering agreement with Level3, all that traffic would instead be going through a different transit provider. Comcast would then likely have to pay to receive that traffic.

Comcast is in a position to charge for access to their customers because they have a monopoly on access to those customers. Those customers may not even have other choices for broadband internet access, because infrastructure has such high barriers to entry.

Because the consumer broadband market has high barriers to entry,[1] there is little competition.[2] That lack of competition in infrastructure is now distorting the market for internet applications, possibly the closest thing to perfectly competitive market that has ever existed,[3] by raising both the barrier to entry and transaction costs.

Yes, regulation would distort the market. In a market that is tending towards monopoly or oligopoly, this is a good thing. Net neutrality is an ill-defined idea, but I think we can agree that we want the market for internet applications to remain as free of a market as possible.

[1] This is not the case under regulatory regimes that require line-sharing, where the consumer broadband market is decoupled from the infrastructure market. Line sharing is not required in the US.

[2] Infrastructure markets are natural monopolies <http://www.linfo.org/natural_monopoly.html>; due to economies of scale.

[3] A definition of perfect competition: http://en.wikipedia.org/wiki/Perfect_competition

I agree that either Akamai and Level 3 should both pay (for all traffic flowing into Comcast; whether it's "CDN" traffic or "regular" traffic makes no difference) or neither should pay. Since they're both saving Comcast money, I'm leaning towards neither. It's unfortunate for everyone else that Akamai apparently set this precedent.

The problem is that these complicated business relationships are affecting our access to necessary services. Would you tolerate your sewer being cut off because two private parties didn't want eachother's shit going through their pipes?

If this were just about a bunch of TV shows it would be different, but this is about the fundemental communications medium of our society. How can we so tightly regulate utilities and over-the-air television, but be so lax with something just as important?

Maybe I should send the Senator my comment on Comcast's blog when they posted their letter complaining about Netflix, which did not get approved by their moderator:


I am a Comcast residential HSI customer, and have many clients who are business HSI Comcast customers. At the same time, I do maintain servers in my own racks at a datacenter.

What is not mentioned in this letter, is that Comcast is already being paid - by me, and by every other customer, for access to the content.

Note that Comcast has never said that the Level3/Netflix issue is about users exceeding their allotted bandwidth (currently at about 250GB/month for residential); presumably, were a Comcast user to use 249GB of bandwidth downloading cute pictures of cats, Comcast would have no objection.

It appears to be the specific issue that Netflix is a possible competitor to Comcast's TV business, that somehow causes Comcast to decide that there is a problem.

Understand this: every Netflix video to be streamed, is specifically requested by a Comcast user, operating under the Comcast-advertised "High Speed Internet" service and presumably within the bandwidth caps that Comcast's own contract allows.

That Comcast presumes to have the right to limit, modify, or decide for me which pieces of the Internet I can have access to, removes Comcast's common carrier protections, calls into question the truth of your (meaning Comcast) advertisements for the HSI service, and raises the issue of whether Comcast is dealing in bad faith with each and every Comcast HSI subscriber.


I'm probably going to get downmodded for this because its unpopular to side with the big guys.


The Netflix/Level3/Comcast dustup was not a net neutrality issue. It was a peering disagreement. Comcast pays Level3 to be a transit provider, so they pay to connect to Level3's network. Traditional CDN's such as Akamai and Limelight pay Comcast in order to get a direct pipe into Comcast's network. Level3 in the meantime was charging Netflix as a CDN since they already had a direct pipe into Comcast's network as a transit provider. So in essence Comcast was paying Level3 to act as a CDN as opposed to the other way around.

While Level3 quickly screamed "Net Neutrality" when Comcast wanted to fix the agreement, that was just a smokescreen for a peering issue.

EDIT (Shimon has covered this as well http://news.ycombinator.com/item?id=2121472)

The reality is that Comcast never raises the issue over transit to e.g. ICanHasCheezburger.

Do you not see that Netflix competes directly with the Comcast sister offering of cable TV and video on demand?

This is a test case to determine how to "tax" every content provider for access to Comcast customers; who as I mention, are already paying for access to the Internet.

Comcast never raised this issue with Netflix specifically. They raised it with everyone using Level3 as a CDN, if ICanHasCheezburger is using Level3 as a CDN then it got raised. Netflix's volume of traffic over Level3 is likely what made it a pressing concern.

I'm well aware of Comcast's dislike of Netflix. Probably better then most. But a vast amount of data being thrown around on these networks is video, most of it by Netflix. While there are net neutrality concerns there, there are also legit network stability and infrastructure concerns.

You say "there are also legit network stability and infrastructure concerns"

I would like to ask, "how do you know this"?

Also, would reference my original point - "Comcast has a residential cap of 250GB/month as being acceptable usage by a customer" - if a Netflix user is staying within that limit, and if Comcast is having problems - they deliberately under-engineered their network, yes?

I would like to ask, "how do you know this"?

Umm.. check my profile, I worked for Comcast for 4 years I know their broadcast and HSI infrastructure pretty well.

Comcast has a residential cap of 250GB/month as being acceptable usage by a customer

Yes and if everyone used it at the same time your network would crawl. Bandwidth on Comcast (And most networks) is a shared service. Caps be damned there's not an ISP in existence who can survive massive simultaneous usage by all their users (such as everyone using Netflix around 8pm in the evening). Unless you want Comcast to throttle down their limits?

Again you keep making this argument a battle between Netflix and Comcast and its not. If Netflix used Akamai as their sole provider of CDN services (who have CDN agreements with Comcast) this would not be a Netflix issue. This is a Level3 and Comcast business dispute.

But yet again, how is this the customers fault Comcast oversold their bandwidth? Comcast set the limits, the max speed, and takes care of the infrastructure. And fyi, electrical grids are designed for peak usage, same with water systems, and same with sewer pipes. Look at stadiums for an example where they engineered the system to handle every crapper to be flushed at the same time.

Comcast has been reaping the benefits of over selling for years and now its time to pay the piper back. They sold it this way and they didn't complain or sink every dollar of profit back into the infrastructure that they made from over selling. In my eyes they are using their customer base to slow down a competitor, and in all rights its probably against some federal law. Some sort of anti competitive law.

How is it the end user's fault that Comcast's network can't handle everyone using the service they paid for?

I understand that everyone does overselling because it's profitable, and makes sense, but don't expect the customer to not use what they are paying for because you have oversold your services.

No ISP on earth can "handle everyone using the service they paid for", the same way that the electricity grid can't handle everyone using their full 100 Amp supply.

Overselling is the way the industry works.

It depends; there are some ISPs that have enough capacity in their burstable circuits, that they could actually do that.

Jeez, I'm really not a Comcast apologist, I'm not sure how we got here ;-)

But in reality you, and I and Patrick above, as probably power users of our internet service, benefit from this overselling. If an ISP actually had to provide the entire bandwidth cap to all their users the only way they'd be able to do this is by raising their prices considerably. Instead they stick a high cap up there to discourage people soaking all the bandwidth with torrents and try to provide the best level of service they can.

The other option is for Comcast to provide the service as advertised, at the current price, yielding a reduction in profit. No business wants to do that obviously, however since Comcast effectively has a monopoly in many markets, they can't (should be allowed to) abuse their market position.

What's to prevent building a network with fiber to the home, with ethernet switches with 100 megabit ports for each home, and a 10 gigabit uplink on each switch going directly to a Netflix server? And is there any reason the per port cost of this ethernet switch should be any more than ten times the typical home ethernet switch?

How is this different than charging Akamai? I pay for my internet connection, why does comcast get to charge akamai for their data?

Peering agreements have been falling apart for years. There are numerous cases where it is not clear, even to a disinterested observer, who should be paying whom.

If we get net neutrality or the like, I think at some level the thing that will ultimately disappear is the unlimited traffic packages available to the consumer as the heavily connected are being subsidized by those paying for a high speed connection but not sucking large amounts of data. If the ISPs can't charge the providers of those packets, they are going to have to charge the people requesting them.

Okay, so tell me something: If the bits came over Level3, but did not originate there, because the CDN was powered by idiots who didn't have a direct peering arrangement with Comcast, would it be fine for Level3?

Is the distinction really just whether or not the bits originate in Level3's network or whether they originate in another network?

It appears to be the specific issue that Netflix is a possible competitor to Comcast's TV business, that somehow causes Comcast to decide that there is a problem.

Actually, I think Comcast's plan is to increase profit margins by squeezing everyone, regardless of what business they're in. Hence the deliberately congested Tata transit links.

removes Comcast's common carrier protections

Sigh. Common carrier never applied to ISPs to begin with.

The congested Tata links are a problem.

I am close to dumping Comcast and going with the other monopoly (DSL via telco) but am not sure how switching between two companies in what is essentially a duopoly helps things...

They are not common carriers, but, they are given protection similar to common carrier in both the DMCA and certain other laws/regs that cover similar ground.

They are not common carriers, but, they are given protection similar to common carrier in both the DMCA and certain other laws/regs that cover similar ground.

The protection is similar but the concept is completely different. Common carrier is based on providing a public or general service and, in return, being indemnified from certain damages. ISPs have no such requirements or responsibilities, they just have complete indemnity. You seem to think they have a responsibility to not discriminate. They don't. They never have. That's what net neutrality is trying to do, but until then they're basically free and clear.

You clearly don't know what you're talking about.

Do you think Akamai should pay to transfer data to Comcast? (They Do)

If yes, why shouldn't L3?

If not, then how should peering agreements work?

Interestingly, if Akamai had decided to terminate their peering agreement with Comcast and route their traffic through Level 3 instead, the situation from Comcast's end would be basically the same. Would that still be justification to cry foul? Would Level 3 be abusing their situation as a top-level transit provider by ... providing transit?

"Now is the time to decide if we want four or five companies owning and delivering all of our information and entertainment"

Way, way too late. It went from 10 to 5 a few years ago.





Remember it makes no difference if it's Republican or Democrat they are both pro massive-corporation. Wait until Comcast starts moving it's call centers overseas to increase their profit by reducing US labor costs.

If politicians aren't going to fight corporate control of health care decisions for the nation, why do you think they are going to bother about something like the internet.

"they are both pro massive-corporation"

More specifically, they are both pro-campaign donations. And it's much easier to court a few big players than thousands of small ones. They may even think they're being fair and objective. But they can only chat with so many lobbyists a day, and the most polished, friendly, helpful, professional ones are - surprise - hired by huge companies.

I am reading Tim Wu's excellent book "The Master Switch" right now that is relevant to Franken's concerns. Covers corporate takeovers of information systems starting in the late 1800s.

Tim Wu recently discussed these issues on CSPAN and I posted his interview on Charlie Rose a few days ago (videos):



Warning: put in a historic context, he predicts a somewhat disheartening outcome.

A cringe worthy update from the CEO's of Time Warner and AT&T. Straight from horses mouth [starts at 18:40], the two share their perspectives on regulation, innovation and the net (recorded on 1/12/11):


Summary: Innovation requires less tax, less regulation. Pleased with recent FCC rules on net neutrality.


Al Franken is not "informed". He is a hollywood shill who happens to fall on Netflix's side this time.


That's a pretty strong ad hominem attack. I didn't like Al Franken until he got elected and started doing a lot of things that make sense (e.g. his proposed bill to fix how rating agencies work, while not getting rid of rating agencies as a private market).

I watched his housing rants he gave (a couple were on C-SPAN) where he was talking about loans being "too hard" to get. How banks needed to loan to poorer people. This was before the collapse and we all discovered the opposite was true. His voting is pro-Hollywood and he seems to have an influence on MN's other Senator.

It isn't ad hominem when he votes and speaks to the point.

So he's more social, while believing in protecting artists. That doesn't make him a "shill" per se. One might find his politics naive but you're accusing him of being disingenuous. Everything I know about him (admittedly not a great deal) says he's at least consistent.

Well, you probably missed the whole "fined for not carrying workers' compensation insurance" episode. He spouts one thing and does another in practice. I would say that is fairly disingenuous.

I would say that makes him a politician. :)

I don't understand why the government should create regulation to tell private companies what to do with their property in this case. I think a lot of the 'net neutrality' hubbub is irrational driven panic. If you don't like the service they provide just pay for something else that does. Running to the government every time a company does something that inconviences you as a user strikes me as dangerous. This isn't life saving health care, the vast majority of the arguments and infographics highlight the many shows you might not be able to watch or websites you might not be able to access. I'm sorry but your need to catch the latest Glee or access your friends update on Facebook aren't a convincing enough argument to agree to letting the feds regulate what private companies do with their business.

Let the downvotes commence.

I've gotta say, whichever PR consultant came up with the idea of spinning net neutrality as "government intervention" really earned his pay.

But you're right. I'll just start my own trillion dollar nation spanning infrastructure project which owes it's existence to leased-from-government-for-nothing rights of way at every single level.

Here's the problem, in my view, with your position

" If you don't like the service they provide just pay for something else that does. "

In many localities there aren't many options for high speed internet service. The fear is that ISPs will find it easier to form a cartel and exact tolls than to compete with each other on service.

Then that is the problem, ask yourself why that is?

Oh yeah, its because the local government gives monopolies to certain companies. That is the root of the problem, address it there instead of bandaid hacks that break core system.

It is not explicit granted monopolies, but more so de facto monopolies arising because the costs for a competitor to enter the ISP business are prohibitively expensive. With material costs, labor costs, and easement costs, it takes a major investment to run a mile of cable.

My question is this: Why are fiber lines not administered by public utilities? It works for power and roads.

Here's a slightly older article (1998) about localities granting cable companies monopolies: http://www.fff.org/freedom/0598d.asp

As for the public utilities I completely or agree, or perhaps do it one better. Set up a not for profit that's independent from the government that sole purpose is to provide bandwidth with no restrictions.

Several locations have tried this (including my home state of Utah), and the cable/telco duopoly lobbyists got new laws passed that prohibited or severely restricted municipal broadband projects.

So once again, it's a problem with local government - a government that is a lot more responsive than the FCC or any federal solution. If the teclos can manipulate your local gov, imagine how effective they'll be at the national level.

I agree that local and state governments are a problem, but only because these national corporations have so much power over them. I don't agree (or at least I'm not yet convinced) that the FCC or Congress adding some "light touch" neutrality regulation would be a terrible problem, or that it's an either/or situation. In other words, these national ISPs need to be fixed at a national level, while broken local regulations need to be handled at a local level. Fixing one may help fix the other.

Once an ISP has established connections to several towns in a region, they can make much more compelling offers to nearby towns than an ISP with no presence in a region, because they've already got a backbone to the area. This is on top of the advantage that almost every residential ISP has in that they already have a monopoly on some other service (phone or cable TV).

ISPs probably should have a monopoly within a town, because it's not economical to set up several independent parallel data networks. The problem isn't that local governments grant these monopolies, it's that they don't regulate them. Ideally, local governments should be tightly regulating prices for internet connections and mandating that they are fair/dumb data pipes.

However, most towns don't have much bargaining power compared to the big ISPs who's quarterly revenue exceeds the town's GDP. Since the free market can't ensure fair or cheap internet connections when operating on the scale of the individual consumer or on the scale of whole towns, then we need to use state or federal legislation to keep the monopolies in check.

ISPs probably should have a monopoly within a town

Better yet, separate wireline service from the ISP. You rent the fiber, coax, or twisted pair copper link from the local infrastructure provider, who neutrally routes your traffic to your desired ISP.

The interesting part is that we are talking about private companies that depend on easements to function. When a business depends on easements, there is probably not a true free market going on. No regulations in that case are very dangerous.

This is an important point and worth providing a link to a full explanation of easements. Wikipedia seems to have a pretty comprehensive (and accurate from knowledge) review of the topic: http://en.wikipedia.org/wiki/Easement

It seems to me that same argument would apply to my local telephone, power, and natural gas company. Are you saying that they should not be regulated either? Just trying to understand your position here.

The simple explanation is that things like the radio spectrum over which wireless anything operates is not property owned by a company; it is a public good owned by all of us. Therefore the government has a role to regulate it.

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