Ev Ehrlich's Everyday Economics

Kabletown

Among the many myths and misimpressions on which the doctrine of “net neutrality” rests is that the Internet is a series of “dumb pipes,” a set of hollow vessels that carry messages the way the pneumatic tubes did on a vintage submarine in a black and white picture from the 1950s.   In fact, it was the spectacularly out-of-touch Senator Ted Stevens who called the Internet exactly that – a bunch of tubes – and remarkably, without ever acknowledging it, the neutrality crowd is in full agreement with him.  After all, that’s the essence of their argument – since the Internet is a set of “dumb pipes” – some kind of message-bearing plumbing -- there’s no reason why “everything should not be the same” as it is flushed to its final destination.

The fallacy of this premise, and the problems that arise when otherwise knowledgeable people tacitly endorse it, is most recently evident in a business tiff between Comcast and a private network company called Level 3.

Level three has been for some while one of the companies that make up the Internet backbone.  In fact, rather than a dumb plumbing system, the Internet itself is a labyrinth of these pipes.  That’s what the idea of “neutrality” doesn’t get – internet messages arrive at this labyrinth, are dispersed through the wormwood in “packets,” and then meet up once again at your computer, where they form a line in their original order and let you see or hear them.  That’s why things freeze up – because the packets sometimes don’t get in line fast enough – and that’s why some services want to be able to pay to let their packets move together, so they don’t freeze up, like a live entertainment transmission, telemedicine, uninterruptible Dick Tracy wrist videophones, or an important financial transaction.

Websites -- content originators -- take stuff to one of the many big “backbone” networks, which in turn take that content and those messages to the local networks that ship them to the people in your neighborhood, the people that you meet each day.  Or, sometimes, they hire a “Content Delivery Networks” o do the job for them; CDNs are companies that takes content from one place and deliver it to the entry way to the local networks that get them to your machine. 

There are many of these backbone providers and they coexist, by and large, through a system called “peering.”  Peering is a system that lets the backbone providers swap throughput so it gets to where it wants to go with the least cost, congestion, and aggravation.  For example, Orange and BT are two of these backbone companies.  If they billed each other every time a message jumped from one of their cables to the other’s, they’d go nuts processing the transactions.  So, instead, they set up a peering relationship, which says that they will trade data – let messages go from one to the other – so long as the volume moving both ways is “roughly” in balance.  In practice, “roughly” means that the volumes should differ by no more than a factor of two.  If for some reason they fall out of balance, they’ll settle up with each other in cash, a process known as “settlements” – I love business lingo.

OK, those are the basics.  Level 3 and Comcast, both having networks that are part of this labyrinth, had such a “peering” relationship.  But recently, Level 3 signed a deal with Netflix stipulating that Netflix would pay Level 3 to carry its movies to the backbone so they could find their way to you.  Netflix, remember, taught you how to get movies in your mailbox, but the pressures of competition and innovation have made that once-revolutionary premise passé.  Now, they want to stream movies to your home, and God bless them for it.  So they cut a deal with Level 3 to bring their films to the Internet, where they would find their way to movie-hungry customers.

So Level 3 showed up at the ports of Comcast’s Internet backbone – not their local networks, the one that brings phone and film and fun to the coaxial cable on your block, mind you, but the big hog cables that make up the digital Interstate – and said, “Hey!  I’ve got some movies to pass through.”  After all, they’ve got peering with Comcast, so there’s an environment of “trust but verify” between them.  Well, sure, that’s how it works, but when Level 3 backed up the truck, the movies they loaded up weren’t a few selected matinees, but the entire Netflix library.  And once they did, the balance of traffic between the two became decidedly one sided, by a ratio of about 5 to 1. 

So Comcast, understandably, told Level 3 their peering relationship  didn’t cover this kind of traffic, and Level 3 would have to buy more ports to Comcast’s network if they wanted to get Netflix’ movies to the movie-hungry final customer.  After all, the point of “peering” on the Internet is to handle each other’s traffic when that’s the least-cost way to do it – it isn’t “you deliver my goods for me, thanks.”

Now, reasonable business practice at this point would be to sit down and work out some kind of arrangement – after all, Level 3 has just signed on to be the docking end of a movie fire hose; what were they thinking when they signed the deal with Netflix?  That they’d simply show up at the door of Comcast or some other backbone provider and thank them for providing carriage as a community service?

Apparently yes, they did.  In essence, they decided to use their status as a backbone “peer” network to get a cheapo foothold into the world of content distribution.  Because rather than negotiate an arrangement, they yelped to the Federal Communications Commission that Comcast’s refusal to carry their goods for them was a violation of an “open” Internet and of the FCC’s oft-stated principle of “net neutrality.” 

Remember, “neutrality” means that nobody can pay for preferred treatment on the Internet.  Even if somebody’s doing robotic surgery on a patient in Ice Station Zebra, the signal carrying an image of Rock Hudson’s ruptured aorta will have to wait until Jimbo the teenager is done downloading a video of a cat playing the xylophone (“That is so cool!”).  Nothing on Earth works that way – no priorities, no rules, everything just “works out.” 

(Actually, I take that back.  When I was a graduate student in Ann Arbor in the early ‘70s  – Go Blue, one year we’ll give OSU a run for their money – there was a seven-street Intersection just before the Broadway bridge that led off into Ward One that had not a single traffic sign.  I remember a guy named Rolf telling me his political science professor citing that intersection as the only working example of “pure communism” – seven streams of traffic intersecting with no rules as to what should happen when they do.  Rolf’s professor was an idiot – I don’t see how that intersection in any way reflected worker control of the means of production, but it did have an idealistic communitarian air to it, which might lead the brainless to confuse it with worker Soviets running factories, but whatever.  On my last visit to friends in A2 a few years ago, I went through the intersection and noticed there were now stop signs on each of the seven corners.  So much for the last recorded instance of  economic neutrality on the planet.)

Level 3’s complaint to the FCC speaks volumes of the misrepresentations that lie beneath the doctrine of “neutrality.”  Does Comcast’s insistence that Level 3 pay for service provided make the Internet less “open?”  In fact, imagine how their other backbone customers, who are either “peering” or “settling,” would feel if they found out that all the movies Netflix was streaming to its million-member customer base were travelling without financial consideration.  Is their demand for payment somehow a form of “prioritization,” or pay for incremental service?  Only in the sense that buying a loaf of bread is preferential, conditional on payment.

I don’t where the FCC will end up here – they know better than to mischaracterize the way business is done among the Internet’s backbone providers, and they can surely see that Level 3 is trying to turn itself into a CDN while maintaining the benefit of being a peering backbone provider.  It reminds me of a cartoon I once saw with two naked guys with paper bags over their heads talking to Noah on the gangplanks of the Ark – “Let us on, we’re monkeys.”   But the FCC (or at least some of it) and its neutrality cheerleaders made such a to-do over the words “open” and “neutral” and “prioritization” that they may feel backed into a corner. 

Moreover, poor Comcast – or as they’re know on television’s funniest program, Kabletown – is trying to buy NBC (for reasons that make little sense to me, but that’s a tale for another day), and the FCC has the chance to make their lives miserable, Jack Donaghy’s efforts to elect Steve Austin to the Congress notwithstanding.

But wait a minute – let’s review what’s come up in this posting – Netflix, movies, videos of cats playing the xylophone.  It’s all about video streaming – or as we called it in Jackson heights during Saturday double features at the Boulevard theater, movies.  Video is coming to dominate the Internet, which bring us to this, a posting by Dan Rayburn, a representative of the streaming media industry.  In his post, whether willfully or not, he misrepresents the situation:

Comcast was for the first time demanding, "a recurring fee from Level 3 to transmit Internet online movies and other content to Comcast’s customers who request such content."

This statement is not true.  Comcast is not asking for a “fee” – that is, a price – for access to its customers.  It’s asking for reimbursement for access to its backbone.  In fact, Rayburn goes on to note that Comcast is not asking for an exorbitant price, or that before Level 3 showed up with an 18-wheeler full of data, peering between the two companies worked.

It’s the principle of the thing, Rayburn argues.  Comcast, in his view, is setting up a situation in which they can charge video content for being carried to the user:

 the real explosion of traffic on the Internet is from video, so while Comcast is not specifically calling out video related content from Netflix or anyone else, that's really what we we're talking about.

The key to unlocking Rayburn’s view is to remember that he’s a representative of the streaming video industry.  Streaming video is the fastest growing  traffic on the Internet, and unlike e-mail from your Aunt May or looking up last night’s NBA scores, it takes a lot of bandwidth.  It eats it up, much like trucks on the road cause much more wear and tear to the road surface and much more congestion to other motorists than do families in their Ford Escorts.  But the streaming video guys don’t want to pay for the bandwidth they use, just like the other Big Websites who thought up “net neutrality” aren’t interested in paying for the congestion they cause of the bandwidth they suck up.

Rayburn – like Level 3 -- is looking for a free ride, dressed up with platitudes about “neutral” and “open” and so on and so forth.  And underlying his scam is the idea that the Internet is a bunch of plumbing-type pipes that flush data to your doorstep.  It’s not.  It’s a complex, dynamic, network of networks, and it has to be run to reflect those realities.  And the burgeoning role of video makes it all the more important that we get past simplistic metaphors and provocative vocabulary and build a competitive, responsive broadband Internet.