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Maybe I'm naïve beyond any recognition, but shouldn't the ISP's or whoever is peering charge based on the bandwidth amounts? It sounds like they have a flat-rate contract with each other and now they're charging more?

Inexperienced in the field? This sort of thing has been going on since at least the '90s; this search ought to bring up some relevant hits: https://www.google.com/search?q=uunet+peering+ma-east

One thing to focus on is that there are 2 customers, and two middlemen. E.g. Netflix <-> Level 3 <-> Comcast <-> a Netflix subscriber.

Netflix and the Netflix subscriber are each paying their ISPs hefty sums for access to "the Internet". In the ideal world, Level 3 and Comcast would peer at various points for maximum efficiency on both their networks.

Comcast enjoys a local municipality government monopoly in their markets, with iffy competition from state and Federal monopolies granted to the RBOCs Verizon, AT&T, and in theory CenturyLink (which owns the US West states, but has never been very serious about Internet service and especially their own "TV"/cable service), and all the small ILECs who provide telephone service where the big boys had no interest.

One big problem here is that "TV"/cable service deployment for the first two RBOCs, who cover the vast majority of the population, has been halted outside of contractual requirements with municipalities and the like. (If you're in a really bad spot, like I am, on unincorporated land adjacent to two cities, the local cable company is not required to provide service and doesn't, AT&T provides slow and expensive (but reliable!) ADSL with very small caps, 150 GiB per month ... and now they're buying the DirectTV my parents use to get around that cable company problem!)

So as noted in the article, the bandwidth flow might be asymmetrical, and for these local "last mile" ISPs, there are technical and economic reasons for only providing asymmetrical service in the first place, e.g. head end noise, but all the Netflix bits coming in through Level 3 to Comcast Netflix subscribers are paid for, by the hefty payments the subscribers pay to Comcast for access to "the Internet". (And which are soon going to get caps as well from what I've read.)

But Comcast would of course prefer you get your "TV"/cable bits from them, and have no particular interest in enabling Netflix to supplant them. And they're now committing fraud on their subscribers, by telling them they're providing access to "the Internet", but deliberately degrading significant portions of it.

From the article, it seems like the "flat-rate contract" the ISPs have for peering with L3 is $0.

The issue that L3 is raising, is that the equipment/appliances that the ISP has installed in these peering arrangements are insufficient to keep up with the amount of traffic which the ISP's customers are requesting, and L3 is attempting to provide.

If the ISPs were to upgrade their peering equipment to handle their customer's requests, there would be no issue.

So by Netflix making a deal with Comcast, did L3 effectively get cut out of the picture?

Also, isn't increasing equipment/bandwidth part of the business? It seems so ridiculously absurd that Comcast is balking to increasing its bandwidth...

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