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Level 3 Wants To Make Peering a Net Neutrality Issue
New submitter thule writes "A story at Gigaom talks about how Level 3 is trying to pull peering into the net neutrality issue. Regulating peering could hamper how the Internet is interconnected, potentially turning it into a bureaucratic mess. Should peering be regulated?"
Reader raque points out that Netflix CEO Reed Hastings is banging the net neutrality drum, too:
"Some major ISPs, like Cablevision, already practice strong net neutrality and for their broadband subscribers, the quality of Netflix and other streaming services is outstanding. But on other big ISPs, due to a lack of sufficient interconnectivity, Netflix performance has been constrained, subjecting consumers who pay a lot of money for high-speed Internet to high buffering rates, long wait times and poor video quality. ... Once Netflix agrees to pay the ISP interconnection fees, however, sufficient capacity is made available and high quality service for consumers is restored. If this kind of leverage is effective against Netflix, which is pretty large, imagine the plight of smaller services today and in the future. Roughly the same arbitrary tax is demanded from the intermediaries such as Cogent and Level 3, who supply millions of websites with connectivity, leading to a poor consumer experience."
as the city makes the choice based on what cable, and phone provider gives them the right bid to lay the lines.
Franchise fees are not a "bid", they are a contractually negotiated fee for using city rights of way. Once a fee is negotiated, it would be hard for a city to say "your fee will be higher" to a second company, since they've set the price for access.
What prevents a second cable system from overbuilding the first is not the franchise fee, it is the lower return on investment from having to compete with the existing system. No business would want to invest heavily in physical plant when there would be little profit in doing so. Their fixed costs would not be recouped by the sales, much less the incremental costs.
It's not like a grocery store where the fixed costs are relatively low to find and outfit a building and have the customer come to you. Cable requires the "grocery store" to go to the customer where he is, and simply lowering prices until the customers stop going to the competitor and start coming to you won't work. It is not economically viable to build the system as you get customers. The turn-on time would be long.
I understand you probably don't work with this type/scale of equipment/network on a regular basis, but the fact is $10k *is* extremely cheap. It's also probably a bit of a bogus number, or at least incorporates a whole lot of stuff beyond the actual connection (not just the cost of the optics, but some of the cost of the blade/chassis, and cost of power and rack space over an X year period, etc). The optics themselves are pretty cheap now - probably no more than $800/side, and with the scale of the large operators it's a good bet they're paying $500/ea for 10g SFPs. Believe me, a network operator of this size sneezes 10g optics without thinking about it - their on-site guys probably play dominoes with the spares.
A little fun math: Let's say for the sake of easy math that the average customer pays $42/month for broadband, or $500/year. Let's say the average lifecycle of a 10g optical link and the associated routers is 3 years, and the single cross-connect costs $10k, spread across those 3 years, for a cost of approximately $3500/yr. So, ignoring the cost of the last-mile infrastructure (partly because the vast majority is in place and has probably been paid off for years), the cable company would have to add 7 customers to pay for each new cross-connect. Again using nice round decimal numbers for the sake of easy math, at a cap of 50mbps per subscriber, you could have 200 customers fully saturating their links before you would saturate the 10gbps cross-connect, assuming ALL customer traffic was being routed that way. So if your first 7 customers paid for the cross-connect, and we're talking about 3-year equipment lifecycles, that leaves just shy of $290k for the ISP to spend on their other infrastructure and overhead.
Summary: I think they'll be just fine, and not need to raise your fees (they probably will raise them anyway, but that's an entirely different discussion).