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.
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.
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.
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.
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.
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.
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, there is little competition. 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, 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.
 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.
 Infrastructure markets are natural monopolies <http://www.linfo.org/natural_monopoly.html>; due to economies of scale.
 A definition of perfect competition: http://en.wikipedia.org/wiki/Perfect_competition
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?
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
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.
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)
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.
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.
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?
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.
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.
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.
Overselling is the way the industry works.
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.
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.
Is the distinction really just whether or not the bits originate in Level3's network or whether they originate in another network?
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.
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.
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.
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?
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.
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.
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.
It isn't ad hominem when he votes and speaks to the point.
Let the downvotes commence.
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.
" 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.
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.
My question is this: Why are fiber lines not administered by public utilities? It works for power and roads.
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.
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.
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.