AT&T Exec Calls Netflix "Arrogant" For Expecting Net Neutrality

jayp00001 (267507) writes "'As we all know, there is no free lunch, and there’s also no cost-free delivery of streaming movies. Someone has to pay that cost. Mr. Hastings' arrogant proposition is that everyone else should pay but Netflix. That may be a nice deal if he can get it. But it's not how the Internet, or telecommunication for that matter, has ever worked,' writes AT&T Senior Executive Vice President of Legislative Affairs, James Cicconi. Mr. Cicconi took issue with a blog post from Netflix CEO Reed Hastings on the importance of net neutrality.

Comments

It's not arrogant, it's correct.

[BronsCon]

Your customers pay you, as their provider, Netflix pays their provider, and it's between you and their provider to determine who, if anyone, pays who, based on the flow of traffic.

Re:It's not arrogant, it's correct.

[Qwerpafw]

Put another way:

* Netflix pays for their bandwidth
* Customers pay for their bandwidth

And yet, AT&T wants more money because they think they have the right to charge Netflix more to pass through their tollbooth.

People aren't paying for "Internet except for Netflix" and Netflix isn't paying their bandwidth costs for "Internet except for consumers."

AT&T, and other providers, should have no right to put up walls. If there are issues of peering, those should be working out at the peering level, and not at the application/service or individual business level.

The news about Apple being willing to pay for AppleTV to have a "special line" to consumers is particularly worrisome and strikes the core of the problems with anti-net neutrality positions: they create unfair markets with barriers to competition. Netflix may complain, but they can (and do! with Comcast) pay if they have to. Apple can afford to pay the gatekeepers as well.

But some new startup (Aereo, for example) or small business? They can't and won't be able to pay those gatekeeper tolls to reach consumers. And they'll be prevented from competing or disrupting.

Big business will thrive in an anti-net neutrality world. Honestly, it might even help Netflix in the long run as barriers to any competing service will be high. But it's anticompetitive and small businesses and startups alike will be prevented from innovating, and maybe even be driven out of the market by an inability to pay these tolls.

Re:It's not arrogant, it's correct.

[Lloyd_Bryant]

Your customers pay you, as their provider, Netflix pays their provider, and it's between you and their provider to determine who, if anyone, pays who, based on the flow of traffic.

What, you mean that someone who pays his ISP for a connection to the Internet shouldn't have to pay extra if he actually wants to use that bandwidth? I'm pretty sure that'd be classified as communism, or terrorism, or whatever the 'ism of the month is.

ISPs will fight tooth and nail to keep from becoming the "dumb pipes" that true net neutrality would make them. Because then they wouldn't be able to siphon off the profits of companies that have actually innovated themselves a business in the Internet space, rather than just continuing to make a buck off of their infrastructure semi-monopolies.

Re: It's not arrogant, it's correct.

[Anonymous Coward]

time to take away their roads.

Re:It's not arrogant, it's correct.

[ZombieBraintrust]

No it is like phone calls. The person who initiates the call pays. They pay because they are the one who is creating congestion. Netflix is not generating any traffic. AT&T customers generate the traffic when they open thier browsers and start downloading movies. It is not Netflix desision that AT&T charges all its customers the same thing. Netflix should not be punished because AT&T promises high speed connections with unlimited access. That is AT&T's fault.

Re:It's not arrogant, it's correct.

[Anonymous Coward]

a movie that needs to be streamed a million times takes up much more capacity and energy

No it doesn't. 10 GB of traffic uses up exactly the same capacity each time it's streamed regardless of whether it's a movie or cat pictures.

If you charge more for heavy trucks you have to charge all trucks.
You can't just charge wall-mart trucks double because you don't like them.

Re:It's not arrogant, it's correct.

[Burdell]

Netflix pays for their bandwidth

Well, but they don't always, at least not as much as anybody else. Several times in recent years, Netflix has switched bandwidth providers to "wanna-be tier 1" networks; that is, networks that are not as well-connected as they'd like to be because they don't really meet anybody's requirements for settlement-free peering. These providers see Netflix as leverage against their bigger competitors and appear to have sold Netflix bandwidth at well market prices in order to strong-arm competitors to provide new network interconnects.

Large networks don't just peer with anybody. There are costs involved in each additional turn-up, both for hardware ports and for the management side. They also don't just peer at a single or few locations (since that can allow outsider actors to cause drastic changes in internal network bandwidth utilization); they require other large networks to peer in a bunch of different places. Some of the smaller networks can't afford to do that, and want to dump large traffic hogs like Netflix at already congested peering points, and then complain that the big guys didn't bend over backwards to help them.

I've worked for small to very-small ISPs for over 18 years, and I definately don't hold Netflix blameless in this. They do things they know will impact their customers and then blame the other networks for all problems (and they aren't the only one, just one of the biggest in recent years).

Re:It's not arrogant, it's correct.

[Monoman]

AT&T can't meet their customer's demand so they are charging the other end (Netflix) for being too popular. Yeah that sounds about right.

Re:It's not arrogant, it's correct.

[bferrell]

This same sort of thinking is what brought about the interstate commerce commission rules for railroads.

They though that if you made more the carrier should too.

The government slapped the carriers once before (railroads). It's time to slap the telecom carriers too

Re:It's not arrogant, it's correct.

[phayes]

AT&T keeps saying that Netflix, which is the company that most of their clients are paying more to get faster Internet access to, has to pay more because Netflix sends more data than they receive.

It's funny but I've never seen a single AT&T statement that they should be paying money to blackblaze, crashplan, & the other cloud backup providers. It's strangely hypocritical because AT&T is clearly sending a lopsided amount of traffic to the cloud backup providers.

Re:It's not arrogant, it's correct.

[mellon]

That would be true of the major cost of providing internet service were the per-packet cost. But in fact the major cost is in installing and maintaining the lines. Next is the cost of running packets through them. That cost breaks down into network management, energy, and infrastructure. In point of fact, there is no real additional per-packet cost. What costs is having enough capacity to carry the packets. So when I buy a network connection that promises 20mbps of capacity, presumably the ISP has 20mbps of capacity for me. At which point you have to ask yourself, what does it matter whether I use the whole capacity or only part of it? Either way, I'm paying for my 20mbps, and I should get to use it.

Of course, the ISP doesn't actually reserve 20mbps for me, at least in the U.S. They figure that for every N customers that are paying for 20mbps, they will have to configure 20mbps of capacity. This is where your talk of socialism comes in: if I actually use my 20mbps that I paid for, and you don't, then in theory you are subsidizing my network use, because there's only 20mbps between N of us (where N could be 10, 20, or even worse).

But even that isn't correct, because it doesn't account for profit. How much of the $80/month I spend on my 20mbps connection is cost, and how much is profit? Suppose N=20. Suppose the profit margin is 90% (which it probably is). That means that 20mbps of actual capacity costs the ISP 0.1*80*N, which is $160. So the ISP is charging the customer $1600 for $160 of bandwidth. They could deliver as much as ten times the bandwidth before their profits went to zero. Chances are that the point at which I am getting Netflix, you are getting Netflix, and all our neighbors are getting Netflix is well below that cutoff, because we typically don't all watch at once.

But even that analysis is wrong, because in fact your ISP does already have 20mbps capacity to your home which is not shared, and is not amortized across other customers. The capacity that is amortized across other customers is core bandwidth: the bandwidth that happens at the peering point, and between that point and the ISP's network distribution center near where you live. That bandwidth is really cheap compared to the bandwidth they have already delivered to the edge of the network: to you.

So in fact it's quite likely that they can deliver full Netflix bandwidth to everyone and still make a profit. So where's your socialism in this picture? It isn't there, unless you mean corporate socialism: government-sponsored monopolies that deliver money-printing profits to those that own them, because we have no choice—we buy Internet from the local monopoly ISP, or we don't get Internet at all. And because we have no choice, Netflix has no choice. They can't go with the ISP that offers them cheaper transit, and use that to drive customers to that ISP, because in most markets there is no that ISP. There is one ISP, zero competition, and a lot of people overpaying for internet service.

Re:It's not arrogant, it's correct.

[nine-times]

Or more to the point: You can't just charge Walmart trucks because you own Target, and you want to use your ownership of the road as leverage against your competitors.

That's the real issue.

Re:It's not arrogant, it's correct.

[Trepidity]

On U.S. mobiles phones, interestingly, both sides pay.

On European mobile phones, on the other hand, only the caller pays, but they pay a non-neutral rate, which varies depending on the type of device the recipient has: calling mobile phones is more expensive (in some countries, much more expensive) than calling landlines.

Re:It's not arrogant, it's correct.

[schnell]

NetFlix using a Tier 3 provider would resell AT&T, who would charge the Tier 3 provider for bandwidth, which would essentially charge NetFlix for bandwidth

Kinda sorta. Here's the problem which makes the situation a little more nuanced than it appears at first. Think of this more like one of those occasional disputes you see where "DirecTV stops carrying ESPN because ESPN jacked up their rates" or something like that. One side wants to pay less, the other side wants to charge more, and it's tough to easily pick out who the good guys and bad guys are in that kind of situation.

Netflix buys most of their bandwidth from Cogent. Cogent has historically been the Wal-Mart of bandwidth - they sell dirt cheap but scrimp on quality to do it. The Tier 1 ISPs have said to Cogent, in effect, "you are not our peer. You will buy bandwidth from us rather than getting it for free," and Cogent doesn't want to pay. That constrains the bandwidth between Cogent and the Tier 1s (which Cogent is definitely not).

Netflix has only gotten involved because, as Cogent's #1 customer, they are feeling the pinch of Cogent's bandwidth crunch. Remember, Cogent is no stranger to peering disputes. The Tier 1s have said to Netflix, in essence, "we aren't upgrading our bandwidth to Cogent for free, and if you want your customers to have better performance you can connect to us directly instead of going through Cogent. Oh, and by the way, you're a content provider (albeit a huge one) and not our ISP peer so don't expect to get it for free, either."

It may sound like a Net Neutrality issue, but settlement-free peering vs. purchased transit has been a contentious issue since the mid-'90s if not before, and it has always been sorted out among the ISPs rather than being regulated by the government. Peering and its market dynamics have always been one of the most sensitive topics among ISPs, but it has almost always been dealt with inside the industry without exposing its gory details to the public - just like how you rarely hear about those "cableco vs. content network" disputes even though those negotiations are always going on... you only hear about it when the crap really hits the fan.

It's a perpetual issue that pits the Tier 1s vs. the Tier 2/3s, and always will be: the smaller ISPs want free peering of course, and the bigger ones don't want to give it away. The Tier 1s argue that they have to pay for a much larger network infrastructure than the Tier 2/3s so they are in effect subsidizing the networks of the smaller ISPs if they peer for free; the Tier 2/3s argue that they shouldn't have to pay to connect to other networks when the end result is (theoretically) better service for everyone.

It is a dangerous and very slippery slope to cast peering as a "Net Neutrality" issue because it invites the government to stick its nose into a topic that the world's ISPs have quietly managed among themselves for many years. "Settlement-free peering for all" sounds good at first blush but creates a dangerous precedent potentially for content providers to be considered as networks. What if CNN.com decides it doesn't want to pay for bandwidth anymore and wants all the ISPs to peer with it as a network for free? What happens when bobshardwarestoreintuscaloosa.com makes the same request? Where do you draw the line? Why should any business pay for transit bandwidth when it is providing content that users want to see? You could theoretically see the whole cost of the Internet flip onto the consumer ISPs if you follow the model to its furthest conclusion.

Another side note - it's not entirely true that "subscribers pay for their Internet, and content providers pay for their hosting." Larger ISPs factor in the revenue of paid transit to their business model - and they *always* have, since the earliest days of the commercial Internet - so that is in effect

Re:It's not arrogant, it's correct.

[DamnOregonian]

Netflix has vast peering arrangements. My company peers with them for our residential customers. It's the only way you can get "SuperHD" content.
I suspect what's going on here, is that ATT's customers are pressuring them for SuperHD (peering-only) content, and NetFlix is saying to ATT: "Sure, just peer with us, and they can have it!"
I suspect that ATT is pissed that they would be forced to peer freely with a mere content provider (as well as perhaps lost revenue for any other lopsided peering arrangements the traffic may transit to get to ATT), and are telling Netflix that if they want to enable the chunk of their customers on ATT to have the higher-bandwidth content, the Netflix can pay ATT for the peering link.

Re:It's not arrogant, it's correct.

[GameMaster]

AT&T can't meet their customer's demands while making the dramatically increased profits that they desire. There, fixed that for him.

Re:It's not arrogant, it's correct.

[postbigbang]

This isn't telephony. It's a data communications issue, upon which rides both time-sensitive data (audio, video) and non-time sensitive data. AT&T's arrogance is that of Southwestern Bell's (remember, this is not the AT&T of old) vision for profits.

It's a monopolistic view. It's the old "we own the highway" versus "we gave you rights of way because you were a municipal and regional utility". I say we reclaim the rights of way, and meter AT&T for their belligerence. That'll fix it for everyone.

Re:It's not arrogant, it's correct.

[DamnOregonian]

I'm the senior network engineer at an ISP. Your assertion of no-cost is utterly incorrect.
Here in the Seattle area, cross-connects typically happen at the Westin building. I assure you it's plenty expensive for cross-connects before you even factor in equipment (multiple 10Gbit optics and line-card ports).

The issue is actually that ATT wants Netflix to go chew cud in response to Netflix saying "You should peer with us for free."
http://www.reuters.com/article...

"“Netflix believes strong net neutrality is critical, but in the near term we will in cases pay the toll to the powerful ISPs to protect our consumer experience. When we do so, we don’t pay for priority access against competitors, just for interconnection,” he wrote, in relation to the ongoing debate over the future of net neutrality and paid agreements between Netflix and Comcast."

You're being caught up as sheep in a war between capitalist organizations. This isn't even an issue of net neutrality.
ATT isn't asking Netflix to pay for traffic transited into their network.

"In his original post, Hastings said internet service providers should give content companies adequate network connections for free, and singled out Comcast for supporting "weak" internet traffic rules."

Regardless of your *opinion* on costs, forcing an ISP to interconnect with someone else is *not* net neutrality. Net neutrality is simply the buzz-word being used by the combatants to rally their supporters.

Re:It's not arrogant, it's correct.

[jxander]

The very existence of Netflix has revealed the truth of the Emperor's new Clothes : ISPs have been promising bandwidth MASSIVELY above their actual capacity. Now that ISPs are feeling the pinch of customers demanding what was promised to them, they're lashing out at the perceived cause of this pain

It would be as though a city metro system sold million and millions of tickets MORE than what they could actually handle, but it was never a big deal because no one really used the metro all that often. But when a reason to use the metro comes up, the whole system is clogged, not functioning properly and basically ceases to function at all. Would you expect the Metro to take the blame? "Yep, our fault, we'll fix it" ... or blame whatever sparked sudden interest. Even if that impetus, whatever it was, only existed to aggravate the metro's over-sold lines, the metro is still ultimately at fault for overselling.

ISPs have been massively overselling their lines for years. Making billions of dollars on the promise of speed and throughput that they KNEW was nonexistent and completely untenable if anyone actually tried to use it. And now people are using it. So who do you blame: Netflix for being popular? Or the ISPs for selling you empty promises and lies, with full knowledge.

WE pay

[btpier]

Doesn't my monthly ISP bill pay for that delivery already?

Nonsense

[fredprado]

The user already pays for it, both to AT&T and Netflix.

Well, *someone* here sound arrogant, anyway...

[pla]

there is no free lunch, and there’s also no cost-free delivery of streaming movies. Someone has to pay that cost.

So the $80 a month I pay my ISP goes to what exactly? Oh, riiight... All those rural infrastructure improvements you've fought tooth and nail against. Got it.

Guess what, Jimmy? Without the likes of Netflix, we have no use for your "internet" that goes nowhere. Perhaps you could go read up on this idea on your Compuserve account.

Classify 'em as Common Carriers under Title II

[QuietLagoon]

Cogent: Reclassify ISPs As Common Carriers Under Title II

In a bit of a clever public relations dance, Cogent has issued a press release stating that while the company refuses to pay companies like AT&T, Verizon and Comcast new peering tolls, they will pay the costs incurred by those companies to ensure there's adequate capacity at interconnection points. Cogent has been at the heart of more than a few debates over settlement-free peering, usually when the levels of traffic exchanged aren't equal. ...

Here we go...

[MrSome]

His comment shows exactly where these ISPs want to take the internet.

It's not about paying for an internet connection so you can get what you want... no no.

They want you to pay for an internet connection to get what they want to give you.

Fed Ex and Amazon

[gurps_npc]

Using the same logic, Fed Ex is slowing down my Amazon purchases over $25, because while Amazon pays for the shipping, I have refused to tip them.

Oh wait, no they are not, because Fed Ex is not run by greedy idiots trying to charge twice for one service.

Netflix should charge fees back to customers

[hawguy]

Netflix should charge back whatever fees they pay to Comcast back to their customers that view content via Comcast. This lets the customer see the true cost of their ISP.

Why should users of Google and other ISPs that don't charge fees to Netflix subsidize Comcast subscribers?

Re:Double-dipping

[Gothmolly]

Netflix streams from AWS, and offers ISPs a sort of staging platform where popular content can be cached within the ISP network, eliminating the peering issue. Many cable providers refuse to implement it.

More Corporate Greedmeisters

[sdinfoserv]

As an American, I really get tired of billionaires arguing with millionaires about money.... All that happens is I get screwed.
- the US has fallen from 16th in 2012 to 31st in 2014 for broadband speed...
- pro sports tickets are almost unaffordable to the average person
- US healthcare is the most expensive per capita in the developed world and is ranked 33 for infant mortality

We need to get of this 'we;re great, capitalism solves everything' fox news mantra and look at what's actually happening.
Otherwise, at some point, there's going to be just 2 jobs left in the US. The guy who owns everything and they guy who cleans his toilet.

Start the supplanting already

[Average]

Google Fiber, meet Netflix. Netflix, Google Fiber. Amazon Web Services, you in? Apple?

It's time to start more overbuilding. Yes, it's expensive. Yes, Comcast or whoever already has the lines and could bump up to 300Mb plans for $50 at almost no additional cost (making them hard to compete against). But, until you build (and build at a much faster rate than the current Google Fiber projects), this is only going to get worse. You're currently dependent on not just a quasi-monopolist monster, but a wounded and irrational monster (because their TV profits are hurting). You have to bypass them.

It's ugly, I know. There will be communities with roadblocks (overbuilding is supposedly legal everywhere since the Telecom Act of 1996, but reality isn't so pretty). Sad, but true. We'll end up bypassing those communities, too. In every community that welcomes you, BUILD. Fiber is nice, but if you have to go DOCSIS/HFC (fiber to the block/neighborhood) with a better upstream split frequency because of cost, build that... coax is under-rated. But build. You can train high school students to lay coax. You can leverage massive discounts for buying 30 million identical ONUs. Build. Please. For the good of the country and the internet.

Re:So what am I paying for?

[Ioldanach]

What exactly does my cable bill give me then, if not access to services on the web?

It gives you access to services on the web, but they have to pay their connectivity bill, too. If the company they chose doesn't have a good connection to your company, though, then your experience with that company will suffer.

In Netflix's case, they chose Cogent, and Cogent wants to take advantage of peering arrangements that presume data will cross their links to other providers in both directions equally, but they want to send far more data than they receive. But they don't want to pay the transit fees that would normally incur.

Honestly, this is the tactic they should take...

[PortHaven]

Netflix announces that Comcast customer's (and only Comcast customer's) rates will go up $2/month.

Who's not paying enough?

[wangmaster]

I'm somewhat sympathetic to the ISPs issues.
1) Internet connectivity at the end user level is oversold. AT&T (comcast, timewarner, google fiber, [insert your ISP here]) does not charge in such a way that every single user can have 100% unfettered access to your bandwidth all simultaneously. It's just the way it works
2) Netflix may pay their ISP for their bandwidth usage.

Here's the disconnect. Netflix's ISP and [insert your consumer ISP here] do not share the same network. Thus at some point, the two ISPs have to cross some barrier. Now if all of [insert your consumer ISP here]'s customers are simultaneously connecting to Netflix at the exact same time for primetime hours, who's responsibility is it to ensure that the peering arrangement is fair? Does the consumer ISP need to pay to make sure that the peering relationship is such that all their users have the ability to stream from Netflix unfettered? Considering 1) above, is this fair to the ISP? They could do so, but to maintain their existing cost structure it'd likely mean that they may have a smaller pipe to another peer. Is it fair to users using those other peers or do they also have simply make sure ALL of their peers are able to fully pass 100% of traffic unfettered at peak times?

The simple answer is, if you expect the consumer ISP to allow full bandwidth to all of these sites, it's going to significantly raise the cost of bandwidth per end user. So we're complaining that consumer ISPs are demanding money from Netflix, but the alternative is to demand more money from the end user or eat the costs. We know eat the costs is never an option in the US market system :). So where's the money coming from? If the consumer ISP started charging people more for this, people bitch about being charged more rather than bitch about crappy Netflix.

Perhaps Netflix's tier 1 should pay for a larger peering pipe to the consumer ISP. But where's that money coming from? They're going to increase Netflix's rates, but even then, the consumer ISP would have to have the proper equipment to handle the larger peering pipe.

I don't really agree with the entirety of either Netflix or the consumer ISP (AT&Ts) arguments, but peering bandwidth has always been a balancing act, especially with multiple networks you have to peer with. This is why we have CDNs to begin with, and CDNs are paid for by the content producer, and they in turn either pay the consumer ISP to host their gear, or work with the consumer ISP to come up with a mutually beneficial decision. In some cases, the reduced bandwidth flowing through the peering reduces the ISPs costs that they can justify hosting the CDN equipment without asking for any money.

I do agree that it's wrong for a consumer ISP to purposefully lopside their peering arrangements to hurt a competitor, just like I agree that there's nothing wrong with the notion of paying an ISP to host a CDN appliance. Given our lobbying system, do you really think that net neutrality legislation will even begin to address the many nuanced aspects of this issue?

Re:I'm already paying AT&T to deliver Netflix

[TubeSteak]

FTFA

Interestingly, there is one special case where no-fee interconnection is embraced by the big ISPs -- when they are connecting among themselves. They argue this is because roughly the same amount of data comes and goes between their networks. But when we ask them if we too would qualify for no-fee interconnect if we changed our service to upload as much data as we download** -- thus filling their upstream networks and nearly doubling our total traffic -- there is an uncomfortable silence. That's because the ISP argument isn't sensible. Big ISPs aren't paying money to services like online backup that generate more upstream than downstream traffic. Data direction, in other words, has nothing to do with costs.

**in other words, moving to peer-to-peer content delivery

AT&T + friends just don't like provisioning more bandwidth for companies that don't directly make them money.

but it *is* a net neutrality issue

[Chirs]

Given that they're specifically asking *Netflix* to pay extra. That's not just a peering issue, that's a type of traffic issue, which makes it a Net Neutrality issue.

It would be a straight peering/transit issue if the Tier-1 ISPs just told Cogent "your traffic isn't balanced, pay for the imbalance" without bringing up what type of traffic it was. In that case Cogent could pay the extra and then charge Netflix more for upstream. Netflix would then pass the costs on to their customers or would find a new ISP.

Re:but it *is* a net neutrality issue

[laird]

They're not asking Netflix to pay anything for transit that Netflix is buying through Cogent - they paid Cogent for that bandwidth.

AT&T is an ISP, who delivers bandwidth to customers. ISPs do peering arrangements with other ISPs because they exchange data with each other roughly equally, and it make more sense to exchange bi-directional traffic for free than to waste time and money billing each other for charges that would roughly cancel each other out.

Netflix is asking for a peering arrangement with AT&T. Netflix isn't an ISP, they are a content provider. Content providers pay their ISPs for transit to push data into the internet for delivery to consumers. And in particular, Netflix doesn't exchange balanced traffic with AT&T - they push a lot of traffic into AT&T's network, and don't receive any traffic, so it's a completely one-sided traffic flow. And that you pay for.

It's not an issue of Net Neutrality. Any content provider who wants bandwidth from an ISP pays for it. And there's no indication that AT&T is differentiating between Netflix' traffic and anyone else's, which is what Net Neutrality is about. If anything, Netflix is demanding preferential treatment over other content providers (who pay for bandwidth, and don't have peering arrangements), and they're trying to use their market power to push AT&T into giving them preferential treatment. Which is exactly the OPPOSITE of Net Neutrality.

Netflix isn't stupid - they know all this quite well. So Netflix wanting to peer with AT&T and talking about Net Neutrality is a bunch of BS hand-waving trying to trick non-technical people into complaining about AT&T, generating some faked-up bad PR to pressure AT&T to sell bandwidth to Netflix cheaper.