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Shouldn’t Netflix get free USPS mail delivery?

By 10 December 2010 27 Comments

Update – Division of labor between broadband and CDN

With less than 10% of the US population subscribing to Netflix DVD rental service, Netflix already pays more than $700 million a year to the US Postal service for the postage for the DVDs they send which is a staggering 28% of Netflix revenue.  Unfortunately for Netflix, the US Postal Service might increase rates and that just doesn’t seem fair to Netflix who is merely sending out DVDs that American citizens requested.  In fact, American citizens have already paid for the roads, the USPS trucks, and the salaries of the USPS workers so the right thing to do would be to give Netflix free USPS delivery!  And if the number of USPS trucks and workers have to increase 3-fold to accommodate Netflix, the tax payers can cover that too.

Of course I’m being sarcastic and it’s actually one of the suppliers of Netflix and not Netflix demanding free broadband delivery.  It is Level 3 Communications that is demanding free delivery over Comcast’s network so they can win the lowest bid to deliver Netflix online (see video explanation).  We all know that it wouldn’t be fair to ask the 90% of the population who don’t subscribe to Netflix to subsidize postage for USPS delivery of Netflix DVDs to the 10% of the population who do use Netflix.  Those Netflix subscribers indirectly pay for the USPS postage through their monthly Netflix subscription fees.

Physical DVD and online delivery aren’t much different

The same online delivery economics apply to broadband networks since both require costly infrastructure as volume goes up.  A small fraction of the broadband customer base subscribe to Netflix and they have been indirectly paying Akamai and Limelight Content Delivery Network (CDN) services.  These CDNs in turn pay Comcast for high speed private peering capacity to deliver online movies from Netflix.  But Level 3 Communications decided that they would leverage and expand their existing Settlement Free Interconnection (SFI or “free peering”) with Comcast to undercut Akamai and Limelight’s CDN service to offer a cheaper delivery service to Netflix.

Once Level 3 won that bid to deliver Netflix movies online, they turned around and asked Comcast for an additional 300 Gbps of free peering capacity.  Comcast gave Level 3 an additional 60 Gbps of free peering capacity on top of the 200 Gbps they were already getting despite the fact that their free peering agreement stipulated a “roughly equal” traffic exchange which Level 3 was already exceeding 2:1.  Now with roughly 160 Gbps of the 260 Gbps of peering capacity out of balance, Comcast told Level 3 that they could continue to get 160 Gbps out of balance traffic for free but the additional 200 Gbps of peering capacity or more requested by Level 3 would have to be paid for.

Level 3 agreed to pay for the additional capacity under protest and went to the media claiming that Comcast was trying to single out video and erect a toll on video.  Comcast replied they didn’t care what kind of traffic Level 3 sent them and that they’re only enforcing their contractual rights in the peering agreement, and that Level 3 would have to pay for additional peering capacity with Comcast just like all the other CDN providers.  Level 3 responded that no CDN provider should have to pay anything to access Comcast’s expensive infrastructure which requires 750,000 route miles of cabling and equipment.

CDN costs are low compared to broadband infrastructure

Level 3′s demand is ridiculous because CDNs have a relatively low cost of providing CDN services because the bulk of their video delivery infrastructure only needs a few feet of Ethernet cabling connecting their caching servers and the rack space needed to house those servers.  Level 3 claims that they’re using their own nationwide backbone infrastructure but that’s largely irrelevant to the CDN business.  That’s because Level 3 would only need to occasionally use their existing 100,000 route miles of infrastructure for first-time content delivery to the caching servers which doesn’t require much capacity since it’s only done once to each CDN distribution location.  It’s the distribution to the customers that require costly retransmissions for each and every customer and that has to happen over Comcast’s vast access network.

The purpose and spirit of peering is that the two network carriers don’t charge each other money if they share costs on infrastructure and benefit equally.  If they don’t share costs equally, then they compensate each other with the money from the customer who uses the network which in this case is Netflix.  Level 3 will collect money from Netflix for their CDN deal but they don’t want to share any of that money with Comcast which does far more of the work to deliver that content.

But our users requested it which entitles us to free delivery!

Yet Level 3 argues that because a small percentage of Comcast broadband customers requested the Netflix video data, then all of Comcast’s broadband customers should pay to upgrade Comcast’s broadband infrastructure to accommodate Level 3′s CDN business which would allow Level 3 to continue offering rock bottom delivery prices to Netflix.  But how is this argument any different from the argument that all American citizens should subsidize Netflix DVD mail delivery?

By that rationale I should be able to start “George’s online backup service”, set up a server at an Internet Exchange, sign up a few Comcast and Level 3 customers, and I would be entitled to peer for free with Comcast and Level 3 with a 10 Gbps Ethernet connection and expand from there.  I would be willing to bet that Level 3 would not extend such a privilege to me or anyone else because I would be trying to exploit their infrastructure and investments for my own personal gain.

While free delivery benefits Netflix, Level 3 Communications, and Netflix customers (including me), but I don’t believe that the majority of Americans and broadband subscribers should subsidize my video service or anyone else’s.  Under the existing system where Netflix indirectly pays its own way through CDN providers like Akamai and Limelight, Netflix helps to expand the Internet.  Under a proposed system where a Netflix distributor expects broadband providers and their customers (most of whom have nothing to do with Netflix) absorb the costs, broadband will grow at the minimal rate that price sensitive consumers will tolerate.  That makes no sense and it is not the broadband growth pace this economically ailing nation is looking for.

UPDATE – Some back of the envelop estimates on online delivery costs

It’s interesting to note that at the bulk price paid peering rate of $1/Mbps/month, and Netflix probably accounting for 300,000 Mbps of the peering traffic from Level 3 to Comcast, that works out to $300,000 a month or $3.6 million a year in delivery costs.  If we consider that Comcast accounts for 22% of the broadband connections in the US and scaled the delivery costs to every broadband home (even if we assumed every broadband provider charged for peering), then it would cost around $16.4 million a year in peering bandwidth to deliver content.  Even with the cost of 300 servers and the server hosting costs, it’s still cheap compared to the $700+ million a year (and growing) for physical disk distribution which explains why Netflix is eager to dump physical media.

At roughly 16 Million Netflix subscribers total and 22% using Comcast, that means there are likely around 3.52 million Comcast users using Netflix.  That works out to about $1.02 per month in paid peering bandwidth per Comcast Netflix subscriber.  At roughly 4 Mbps per Netflix HD video stream, 300 Gbps of peering capacity would serve 75,000 concurrent Netflix viewers on Comcast broadband which is 2.13% of the Netflix user base.  As Netflix usage increases, Level 3 will need to buy more peering capacity.

27 Comments »

  • Stephen Schultze said:

    To begin with, the USPS is a federally created monopoly with many statutory obligations of the sort you would balk at for ISPs. But perhaps you agree that Comcast’s market power resembles the USPS?

    Second, the mail market is purely “sender pays” which is very different from the last-mile internet market (with good reason).

    Third, all your discussion of “free delivery” is disingenuous. Netflix is paying Level 3 to deliver their bits most of the way (entirely unlike your analogy to the USPS).

    In a world in which Netflix hired their own trucks to get the DVDs to your neighborhood, and in which recipients already paid the USPS to deliver those letters the last mile, would it be reasonable for Netflix to not expect to be charged? Yes.

    But on the rest of your post:
    “Yet Level 3 argues that because a small percentage of Comcast broadband customers requested the Netflix video data, then all of Comcast’s broadband customers should pay to upgrade Comcast’s broadband infrastructure to accommodate Level 3′s CDN business”

    Level 3 argues that Comcast subscribers should be able to use the service they paid for. Full stop. If Comcast is misleading customers about how much bandwidth, speed, or total transfer they have paid for, that is another problem entirely.

  • George Ou (author) said:

    @Stephen Schultze

    So how do you get around this inconvenient issue.

    “By that rationale I should be able to start “George’s online backup service”, set up a server at an Internet Exchange, sign up a few Comcast and Level 3 customers, and I would be entitled to peer for free with Comcast and Level 3 with a 10 Gbps Ethernet connection and expand from there. I would be willing to bet that Level 3 would not extend such a privilege to me or anyone else because I would be trying to exploit their infrastructure and investments for my own personal gain.”

    Networks have always had all participants pay their share to connect. That ensures that no one party picks up the tab, least of all the consumer.

  • Steve Schultze said:

    @George

    “By that rationale I should be able to start “George’s online backup service”, set up a server at an Internet Exchange, sign up a few Comcast and Level 3 customers, and I would be entitled to peer for free with Comcast and Level 3 with a 10 Gbps Ethernet connection and expand from there.”

    Are you objecting to the cost of installing/activating/maintaining an additional port, or are you objecting to the ongoing cost of “terminating” traffic more generally (however it gets there)?

    If “George’s online backup service” isn’t terribly high traffic, it will want to interconnect with an existing entity that interconnects with Comcast (and the rest of the internet), and that will be the MOST network-resources efficient solution for both parties. Level 3 could do likewise if Comcast tries to negotiate an anticompetitive agreement, even though that would be LESS network-resources efficient than a direct peering. The problem with this competitive safeguard is that Comcast has frequently demonstrated a willingness to leverage its last-mile market power in combination with forced routing through congested transit links (like Tata) in order to gain more favorable transit/peering terms (all the while selling its customers undifferentiated internet service). So, what we have is Level 3 requesting more ports directly because it is the most efficient thing from a network resources perspective for both parties. Level 3 didn’t bother trying to indirectly route around the problem, because it knows the game Comcast is playing, and the game is fixed.

    My point is that whether it’s a direct request of ports or an indirect attempt to deliver via third-party transit, Comcast holds exclusive power over their customers. This gives them the ability and incentive to use that market power to distort competition.

    “Networks have always had all participants pay their share to connect.”

    Indeed, but what counts as “their share”? And who should get paid and who gets to collect?

  • Mark Taylor said:

    George, what a good analogy (though not for the reasons you suggest).

    Netflix pays the USPS to deliver DVDs on their behalf.
    Netflix pays Level 3 to deliver electronic files on their behalf.

    The landlord of an apartment building does not have a meter on the mailboxes in the lobby to make that DVD available to his renters.
    The last mile owner is imposing a toll on Level 3 for them to carry the electronic file over their last mile network.

    Both the postal service and Level 3 operate in a very competitive market.

    But the landlord of the apartment complex and Comcast, which operates the last mile, are sole owners of their infrastructure with no competitive choice. The only difference is that the apartment renter has a huge choice of other landlords and moving is easy. The last mile consumer has almost no choice and it is hard to move.

    Mark Taylor
    VP, Level 3 Communications

  • George Ou (author) said:

    @Steve Schultze

    It should not be that difficult.

    I don’t support a law mandating that I or any else is entitled to someone else’s resources at zero cost. I don’t feel that anyone is entitled to use 10 Gbps (in any direction) of someone else’s network without compensation.

    I also don’t buy into this idea that the broadband users should pay the entire bill to connect while businesses pay nothing to connect to the network. It makes no sense to dump the entire bill on the most price sensitive and least able to afford segment of the market.

  • George Ou (author) said:

    @Mark Taylor

    Your postal analogy is ridiculous since you’re pretending that the last mile is equivalent to an apartment complex and you’re pretending that your backhaul is the equivalent of the USPS when it’s barely even used. The backhaul for any CDN service is used maybe 1/1000th of the time as it is only used for original content replication and you’re really no different than other CDNs who lease (rather than own) their own backhaul at very low cost. Your backhaul is paid for by your transit services and it’s barely touched and barely relevant in the CDN business.

    You’ve set up a CDN business that primarily relies on a few feet of Ethernet cabling to hand off hundreds of Gbps of traffic to Comcast. Comcast on the other hand is forced to carry those Gbps over 700,000 route miles of infrastructure that is extremely expensive to maintain and upgrade. That’s not an equal division of labor by any stretch of the imagination and your backhaul argument is nothing more than smoke and mirrors. Your whole argument that you and every other CDN with only a tiny fraction of the delivery costs should pay nothing to exploit the much larger network is nonsense.

    The bottom line is that if Comcast had won Netflix’s CDN business and they wanted to dump 500 Gbps of CDN traffic onto your network over the same peering connection at a ratio of 5:1, you know full well that you wouldn’t tolerate that and you would be billing Comcast. You know full well that you wouldn’t let me or any other startup peer into your network at 500 Gbps for free.

  • Richard Bennett said:

    Stephen Schultze and Mark Taylor are dancing around the issue and inventing facts. Schltze says: “Netflix is paying Level 3 to deliver their bits most of the way…”

    If they are, they’re getting screwed. Level 3 can support the entire Netflix business under the terms they’ve proposed to Comcast with about 750 feet of cable and some Ethernet cross-connects. For Comcast to deliver the Netflix bits to their common customers, they need to use nearly all of the 750,000 miles in their extensive (and expensive) network.

    The trouble with the net neut analysis most of the time is a faulty set of facts. Look, this information is not obscure, so I have to believe that anyone who doesn’t have it doesn’t want to know the facts. Read my little report, it covers the whole spectrum of issues. But the “George’s Backup Service” goes right to the heart of it: L3 wants 60 fat direct connects to the Comcast network for its video servers, not its backbone, and it wants them for free. As if.

  • George Ou (author) said:

    @Richard

    That was some great analysis/research Richard.

  • Richard Bennett said:

    Thanks, but I fear it’s too long. Here’s another way of telling the story:

    A priest, a rabbi, and a Level 3 peering coordinator go into a bar. The priest and the rabbi order drinks, but the Level 3 peering coordinator tells the bartender he wants all the booze in the house, and a whole lot more. The bartender’s taken aback, but he names a price. Level 3 says “nope, you’re givin’ it all to me for free, and BTW, I’m gonna sell it back to your customers for half what they’re paying you.”

    “This is a stickup, right?” says the bartender. “Nope, this is net neutrality” says Level 3; “I’m entitled to all your booze cause you’re the only bar on the block, and if you don’t give it to me now, my Big Brother is gonna kick your ass.”

    Actually, it is a stickup.

    I don’t doubt that Level 3 is aware that the FCC previously ordered Comcast to give free bandwidth to Vuze, so they figured why not cry “net neutrality” and see what we can get. They should also note that the free bandwidth Vuze got hasn’t kept that company afloat. While Vuze doesn’t have a crushing debt load, they also never had an attractive service, and their turn toward a pay-for-porn business model can’t make Commissioner Copps happy.

    It’s going to be interesting to see how this plays out.

  • Vytautas Valancius said:

    George, would you at least consider that this dispute can create a dangerous precedent that enables Comcast to squeeze out competitors in other horizontal markets?

    Let’s say users move in troves to Netflix and Comcast Xfinity service is suffering. Next thing you know: 1) Comcast cranks up the price to peers that send NetFlix video streams, 2) peers pass the bill to Netflix, 3) Netflix passes the costs to consumers, and 4) Xfinity is cheaper and Comcast wins.

    It’s perfectly possible that the current dispute is not really about Xfinity vs Netflix. Nevertheless, wouldn’t we want FCC to be alert about such developments and keep a tab on Comcast, making sure it is not abusing the monopoly in one horizontal market to advance interests in another horizontal market?

  • Stephen Schultze said:

    It seems clear that further appeals to reason would pointless in this thread. I have explained why I think the market is broken in such a way that Comcast has the ability and incentive to act anticompetitively, and why their past behavior and their behavior in this particular dispute is particularly unlike an entity in a competitive market. Further references to “dumping traffic”, attempts at bean-counting, inapt analogies, and accusations of mendacity are not constructive.

    Over and out.

  • George Ou (author) said:

    @Stephen Shultze

    “Indeed, but what counts as “their share”? And who should get paid and who gets to collect?”

    Paying a fair share means something other than $0/Gbps. Setting up a few servers and a few feet of Ethernet cabling and some minimal usage of a backhaul (owned or leased) doesn’t entitle you to use 750,000 route miles of someone else’s network at no charge.

    Who gets to collect a fee? How about the people who built and invested in 750,000 route miles of network infrastructure and employ tens or hundreds of thousands of people to keep the network operating and upgraded? Seems like the right kind of incentive to me.

  • Tech at Night: Net Neutrality, Copyright, iPhone, Verizon said:

    [...] George Ou points out that if Netflix gets to demand free peering with Comcast, then Netflix ought to demand free shipping over the postal service. After all, if neutral means free, then that’s the next step, right? Just shows how absurd the radicals really are in all of this. Network investment costs money and that money must be recouped with profit, or else that investment isn’t going to happen. [...]

  • George Ou (author) said:

    @Vytautas Valancius

    The FCC does keep tabs on Comcast. They immediately looked into this issue and haven’t said anything yet.

    Now what do you want them to do in this case? Have the FCC force Comcast to give its property away for free so that another company (Level 3) can sell their goods at a fraction of the price? That’s robbery.

    Even if the government declares a company a monopoly (which isn’t the case here), you can’t force them to give their goods away for nothing. That’s violates fundamental property rights.

  • Manuel Herrera said:

    “A priest, a rabbi, and a Level 3 peering coordinator go into a bar. The priest and the rabbi order drinks, but the Level 3 peering coordinator tells the bartender he wants all the booze in the house, and a whole lot more. The bartender’s taken aback, but he names a price. Level 3 says “nope, you’re givin’ it all to me for free, and BTW, I’m gonna sell it back to your customers for half what they’re paying you.”

    OK, I’m probably “not getting” the issue, so apologies in advance if i’m way off.
    But this is what i think, and it seems to me you’re ignoring the fact that their “very expensive network” is financed by the end user, and the end user of course expects them to mantain and upgrade their network (otherwise they’d stop paying if something better came along)

    If an end user like myself is paying for a 100 mb INTERNET connection, isn’t it Comcast’s responsibility to deliver on the agreed bandwidth, since you know… they are not exactly giving me their bandwidth for free.

    I mean, am i missing something here? It’s not like we’re having Comcast’s bandwidth taken hostage here. The only thing that i see happening here, is that Comcast’s customers finally found a way to use the bandwidth that they are paying for. Something that i’m sure is taking a lot of “broadband providers” by surprise, and never even considered that if you offered a faster connection, people just might start using the internet for things other than just to check their e-mail and browse the web. You know… people actually taking advantage of the speed that they pay for.
    And in the case of Comcast it’s even worse, since their bandwidth caps are laughable. I can download about 2-3 times more of what they offer with my incredibly outdated and overpriced 5 mbit Telmex (Mexican DSL) connection. (70 bucks for 5 mbits… it’s no coincidence that the owner of my ISP is the richest man in the world)

    So to me it does seem like a net neutrality issue, isn’t it the ISP’s responsibility to actually deliver the speed that their customers are paying for with out double dipping?

    and before the argument where it was claimed that “end users shouldn’t have to pay the full price” I will ask you… why not? and isn’t that whats happening already anyway? and if it’s not, then are you suggesting that bandwidth is being subsidized to the customer by the ISP somehow or other corporations somehow? (highly doubtful with these high prices and terrible bitcaps)

    If i pay for 100 mbits of internet access, it’s the ISP’s responsibility to connect me to where ever i choose, this isn’t a private network, it’s the Internet.

    So, again, i might not get the issue at all, but if you guys could explain me one thing maybe i could see eye to eye with your view.

    How is it level 3′s fault, that Comcast doesn’t actually the capacity to deliver the bandwidth that their customers are paying for?

    I’m obviously not very savvy on how networks work after my bits and bytes leave my ISP, but i sure as hell know how they work before they do, and it ain’t free or cheap.

    Also, there was one thing i didn’t get from your little joke.
    You said:

    “nope, you’re givin’ it all to me for free, and BTW, I’m gonna sell it back to your customers for half what they’re paying you.”

    This would be true if customers stopped paying Comcast altogether right?
    Except they don’t, do they?

  • Dave said:

    Mark, keep in mind that Bennett is a paid lobbyist for Comcast, and Ou for AT&T, per their own admissions. Of course they’re going to keep on talking about “sender pays”, they’ve never worked in Internet peering.

    ADMIN NOTE – Dave,

    This is the last time that I will remind you to stop libeling people here. Neither Bennett or myself or our organization are lobbyists and we’ve corrected you before.

    We give you a LOT of leeway to say whatever you want, to criticize us, and to post your opinion. But if you lie about any of us here again, you’re not welcome to post here anymore.

  • George Ou (author) said:

    @Manuel Herrera

    If you wish to communicate with me, does that entitle me to a free connection on your broadband network? Does that entitle other businesses to a free connection to the network?

    You pay to connect your home to the network, you’re not paying to connect someone else or their business to the network. You’re paying to connect to people who have paid to connect to the network.

    What people were complaining about when Ed Whitacre made his controversial comments was the insinuation that he wanted to double charge the websites. But this isn’t a double charge as Level 3 wants to connect to Comcast for nothing but resell their network to Netflix. That’s why Richard Bennett’s analogy is so good because it is the equivalent of walking into a bar and demanding free drinks so that he can resell it to the other patrons at half price.

  • Richard Bennett said:

    @Manuel Herrera: I pay Comcast for the use of their network, $42.95/month for download rate up to 25 Mb/s and a download cap of 250 Mbytes/mo and an upload rate up to 4 Mb/s with an upload cap of 50 MBytes/month. This strikes me as a fair deal, so and I don’t mind paying it.

    Level 3 wants to use the Comcast network at an upload/download rate of 600 Gb/s with no caps for no charge. If Comcast is going to allow some users to connect under those terms for no charge, it strikes me that the price I’m paying is no longer fair; why should some users have to pay for the use of the Comcast network and others get it for free? And make no mistake about it, Level 3 wants to connect its servers directly to the Comcast network, not to “The Internet” at large.

    What seems to confuse people about net neutrality is the tendency to talk about “The Internet” as if it were a place when the reality is that it’s simply a technology. You don’t pay for a connection to “The Internet” any than you do for a connection to “Ethernet,” you pay for a connection to a specific provider’s network, and that provider connects to the other networks that use Internet technology according to a variety of terms that at the end of day are either cash for service or barter. The terms under which these network operators connect to each other are market-driven and largely unregulated.

    Comcast offers a video-on-demand service to their cable customers. The pricing of this service reflects their costs for licensing content, transporting it to their customers, maintaining their system, and profit. Netflix proposes to compete with this service with a service that has no costs for transport. That’s not fair to anyone, and the long-term effect is to rob network operators of the means and the incentives to upgrade (or even maintain) their networks. I don’t see that as a good outcome, do you?

    @Steven Schultze: I’ll take your latest comment as confirmation that your prior claim that Level 3 delivers the bits most of the way was false.

    @Dave: As George says, I am not a lobbyist, and I have never claimed to lobby for Comcast or anyone else. George has your IP address now, so I suggest you confine any future remarks to the non-libelous zone. There are enough kooks making scurrilous charges and calling names on the net already, you’d not making it any better with this sort of childish misbehavior.

  • Stephen Schultze said:

    @Richard

    No, but as I noted it’s not terribly relevant to whether the market is well-functioning anyway. In any case, the thread degenerated quickly so I’m done.

  • Omar said:

    @Richard Bennet for Manuel

    What you’re effectively saying is that your connection to the internet is the same as Level 3′s or anyone else’s. That you, as a consumer are at the same level or have same type of connection that any other machine connected to the network does. Comcast is merely acting as a middle man between you and Level 3 (or any other CDN) so of course, clearly, Comcast isn’t involved in this connection so why should it have to pay for this traffic on its network? Where do you draw the line? Who else qualifies for this new fee? Should google have to pay comcast a special heavy-traffic fee because everyone goes to google a lot?
    Comcast is saying this is just a regular peering agreement gone awry when in reality this is a precedent setting event. No CDN has ever had to pay an additional fee to last-mile service providers.

    I was going to address your metaphor directly but it’s not worth it. You can’t relate the way the internet works to 3 guys in a bar.

  • americanconservativenews.com » Blog Archive » Tech at Night: Net Neutrality, Copyright, iPhone, Verizon said:

    [...] George Ou points out that if Netflix gets to demand free peering with Comcast, then Netflix ought to demand free shipping over the postal service. After all, if neutral means free, then that’s the next step, right? Just shows how absurd the radicals really are in all of this. Network investment costs money andArticle source: http://www.redstate.com/neil_stevens/2010/12/11/tech-at-night-net-neutrality-copyright-iphone-verizon/ conservative blogs main feed conservative news, freedom news, politics, red state, right wing news [...]

  • George Ou (author) said:

    @Omar

    “Comcast isn’t involved in this connection so why should it have to pay for this traffic on its network? Where do you draw the line?”

    Omar, you have to be completely oblivious to even the most basic of facts to believe that “Comcast isn’t involved in this connection”. Comcast is directly involved in this connection. Level 3 wants 300 Gbps of direct connectivity into Comcast’s network and they want Comcast to provide 30 10-Gbps ports.

    Where we “draw the line” is when you want to directly connect to another company and you’re going to cost that company a lot of money in terms of infrastructure upgrades form the peering location to the backhaul to the access network, you have to pay.

  • Omar said:

    @George

    Sorry, you missed the sarcasm in that statement.

    The fundamental problem is that this *not* a peering agreement. Level 3 offered to *pay* for and install all the hardware themselves. What you have is Comcast customers requesting Netflix traffic. Netflix’s provider, Level3 is contacting Comcast to connect to their network to provide the bandwidth *Comcast* customers are requesting. Comcast on the other hand did not want to pay for the connections their customers needs. In reality, Level3 and TATA are the only two connections Comcasts works with. At best you could try to consider this is a transit agreement, which is one you traditionally *do* pay for. But for this to be a transit agreement the Level3′s traffic would have to be destined for someone *other* than Comcast customers. What you have happening is Comcast doesn’t want to pay for the connections they need. In fact, there was a recent release of their daily usage of TATA’s connections. It showed that Comcast regularly operates its outgoing connections at capacity. They operate on giving their customers the absolute bare minimum so it is of no surprise that they didn’t want to enable anyone else to provide good service on their network.

  • Omar said:

    Oh, I should clarify. If the *rest* of Comcast’s infrastructure can’t handle the traffic it sells to its customers then that’s Comcast’s problem. Level3 offered to pay for making the major connections that would be necessary from Level3′s end. Even though they shouldn’t have to do that either.

  • George Ou (author) said:

    @Omar

    No, sorry for your confusion. This is absolutely a peering dispute. My new post explains the division of labor, and why consumer broadband prices don’t cover private peering arrangements on behalf of companies.

    http://www.digitalsociety.org/2010/12/division-of-labor-between-broadband-and-cdn/

  • Digital Society » Blog Archive » Division of labor between broadband and CDN said:

    [...] would be “localized” for Comcast, Level 3 Vice President Mark Taylor argued in a comment on my blog that Comcast is merely the equivalent of an apartment complex landlord trying to extract an unjust [...]

  • Digital Society » Page not found said:

    [...] Shouldn’t Netflix get free USPS mail delivery? [...]

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