Net Neutrality - "The Fast Lane"

The FCC has said that they want to allow content providers and ISPs create arrangements to allow for prefered delivery. Needless to say this has not gone down well in the Net Neutrality community. I have a somewhat different perspective on this and will explain here what the issue is and my view. The Internet works on what is called a "Best Effort" basis. This means that there are no guarantees about how much bandwidth any connection gets or how long data will take to go across the Internet. There are many technical parameters are involved, but I want to compare it to Plain Old Telephone Service (also known as POTS). When you make a POTS call, you get a guaranteed end to end connection to the person that you are calling. In the wireline world, there were legal requirements for quality. The FCC could apply fines if the phone companies did not meet these quality standards. In the world of the Internet, there are no guarantees.

This Best Effort behavior has worked well for a very long time. It still works well. But there is a change in behavior with the user base and that has to do with video. Streaming video has taken over as the big bandwidth user on the Internet and Netflix is the biggest user of that. Unlike other services this has created a huge imbalance in traffic being sourced and that is against the way the Internet has been constructed. To deal with this, a landmark deal between Netflix and Comcast (actually the largest residential ISP in the US) to connect the two directly and Netflix is paying Comcast for that connection.

FCC Chairman Tom Wheeler said last week that he wants to support these kind of deals and other deals that allow for ISPs and Content Owners to create relationships to deliver content with better quality than Best Effort. The first thing is that Netflix is actually NOT a content owner (in general). Netflix is a content aggregator and provides a very nice way for people to watch video over the Internet. The content (outside of House of Cards) belongs to someone else. The reason I note this is that the Content Owners and the incumbent ISPs already have a relationship in a different domain. That is the domain of broadcast video. In that relationship, the cable companies, telcos and satellite companies pay the Content Owners to be allowed to carry their content. This exists today and we don't seem to have a problem with it - Well other than the price of the service and the quality of the content.

The Incumbent ISPs (as they all are also broadcast video providers at some level) want to flip that script and get paid to carry the content. I see no way that this happens. If you are Disney, there is no way that suddenly you are going to PAY to have someone watch ESPN. The real impact here is on Content Aggregators like Netflix. Depending on how the deals are cut, it looks like this will not be a big negative impact on Netflix. In fact, it may have little to no impact if it makes Netflix pay less money to Cogent (the network they use today). The other big aggregator that we are familar with is Youtube. I think that it will be hard for Google to want to pay for people to watch Youtube unless they decide to make advertising even more intrusive.

The amount of traffic from a regular website is actually pretty small compared to the size of the pipes that are being provided today. So though people may think that this will be a challenge across the board, there is no reason to think that for now.

So, what does this mean to the average user? Probably nothing. You need to realize that there is a lot of change going on in this area. Companies of all kinds and Regulators at all levels are struggling to find the right way to proceed. A lot of the arguments that are made are hyperbole. They want to influence people to take a specific stand to help their organization thrive. But like anything the answer is probably somewhere in the middle. So listen with a skeptical ear and if you have questions on this topic please feel free to contact me. I know that some of my readers are also experts in this area and I encourage them to write on this and other topics. Feel free to comment here, create your own blog, or I will host your posts as a guest.

Have a great day and back to business tomorrow!

Jim Sackman

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