Tue, 11 Nov 2014

Net Neutrality

Thinking past hop 1

I had a great idea a few days ago, to start a website streaming cat videos called Petflix. I rented a server for $10/month that gave me 1Mbps of outbound bandwidth.

Growth has been exponential. I now have 20 customers that now pay me $1/month for streaming cat videos. Unfortunately, during peak cat video viewing hours, I've started getting complaints that the video streams are choppy.

Each stream uses 100kbps. So when I get more than 10 concurrent viewers, I max out my bandwidth, and packets start getting dropped.

I could buy another 1Mbps of bandwidth for $10/month, but that would make my website unprofitable. So I came up with a brilliant idea that would keep this operation going.

I have an old computer in my basement that I'm not using. I called up Comcast and offered to send them my computer, preloaded with all of my cat videos. They could install it in their data center, and I would configure my DNS servers to send all of my traffic originating from Comcast customers to the computer in their data center. Since 90% of my customers are on the Comcast network, I can grow my website without incurring any additional bandwidth costs.

Obama on net neutrality

The recent statement by Barack Obama on net neutrality suffers from the same error that most proponents make in arguing for net neutrality. It assumes away the problem of how the internet actually works.

Packets don't magically appear on an ISPs network, ready for the ISP to either send on to a customer, or throttle or block for some nefarious reason.

The Internet is a big interconnected network with lots of different agreements for connecting two networks together. As the owner of Petflix, I pay Tektonic for connecting my virtual server (which I also pay them for) with their network. Tektonic pays to connect their network with TierPoint (and for power and space in a data center). TierPoint pays to connect their network with Level 3. Level 3 and Comcast connect their networks, but the terms are contentious. And as a customer of an ISP, I pay for connecting my home network with Comcast.

Traditionally, large networks like Comcast and Level 3 would form settlement-free peering agreements. Both parties get about equal value out of connecting their networks, and it was deemed mutually beneficial to connect their networks without one party paying the other. Netflix started sending lots of traffic over the connection between Level 3 and Comcast, and Comcast no longer thinks they are getting equal value from peering, and wants to renegotiate so Level 3 pays them.

To be fair, Obama sort of recognizes that the problem isn't just between the ISP and their customers. One of his bullet points argues that net neutrality should apply between an ISP and other networks.

But if we apply the other rules of No Blocking, No Throttling, and No Paid Prioritization to the connections between ISPs and other networks, it's unclear what kind of arrangements would be legal. Would the government have to mandate the amount of bandwidth at these interconnects?

What We Talk About When We Talk About Bandwidth

Getting back to my parable, when a customer of Comcast pays for 20Mbps of bandwidth, and they can't even get 100kbps of throughput to Petflix, whose fault is it?

Is it Comcast's responsibility to ensure that there is enough bandwidth through Level 3, TierPoint, Tektonic, and Petflix?

Is it Petflix's responsibility?

Fortunately, we have a pretty good way of sorting it out: markets. If Petflix is so important to Comcast customers that Comcast will lose customers to competitors by not providing a satisfying cat video viewing experience, Comcast will likely work to ensure sufficient bandwidth is available, unless the cost to do so makes those customers unprofitable.

If Petflix customers start cancelling their subscriptions because they can't enjoy my videos, I will probably pay to ensure sufficient bandwidth is available, unless doing so makes the operation no longer profitable.

Net Competition

I'm sure readers will object that Comcast is nearly a monopoly in most markets, and therefore markets won't solve the problem. And I agree. So instead of championing net neutrality, I encourage readers to champion net competition.

Instead of adding federal regulation on top of local regulation which grants ISPs like Comcast monopolies, deregulate the market in ISPs. In Portland, there could be three high-speed ISPs competing for consumers' business soon.

Nobody knows what amount of bandwidth should exist between the millions of connections between networks, and who should pay how much to whom for these connections. Only the market can sort it out.

Obamacare for the Internet?

Senator Ted Cruz referred to net neutrality as Obamacare for the internet. Is that a valid analogy?

"Net Neutrality" is Obamacare for the Internet; the Internet should not operate at the speed of government.

— Senator Ted Cruz (@SenTedCruz) November 10, 2014

I would consider these the primary characteristics of Obamacare:

Obamacare doesn't seem like a great analogy for net neutrality. Both do add federal regulation on top of local/state regulation. And it's not inconceivable that if the FCC were to start regulating ISPs in the way that Obama suggests, that problems caused would lead to suggestions for more government "solutions" like government-run markets for network connectivity, but that's a bit of a stretch.

With a little research, Cruz probably could have come up with an act of Congress that would make a better analogy than the ACA.

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The state is that great fiction by which everyone tries to live at the expense of everyone else. - Frederic Bastiat