Netflix CEO On Net Neutrality: Large ISPs Are the Problem

KindMind writes: At Wired, Netflix CEO Reed Hastings has posted his take on net neutrality. He lays the problem at the feet of the large ISPs. Hastings says, "Consider this: A single fiber-optic strand the diameter of a human hair can carry 101.7 terabits of data per second, enough to support nearly every Netflix subscriber watching content in HD at the same time. And while technology has improved and capacity has increased, costs have continued to decline. A few more shelves of equipment might be needed in the buildings that house interconnection points, but broadband itself is as limitless as its uses. We'll never realize broadband's potential if large ISPs erect a pay-to-play system that charges both the sender and receiver for the same content. ... It's worth noting that Netflix connects directly with hundreds of ISPs globally, and 99 percent of those agreements don't involve access fees. It is only a handful of the largest U.S. ISPs, which control the majority of consumer connections, demanding this toll. Why would more profitable, larger companies charge for connections and capacity that smaller companies provide for free? Because they can."

Comments

Big Data

[AlecDalek]

It's extortion plain and simple. It's never been about actual capacity. Big Data is trying to squeeze as much revenue out of us as the can.

Re:Big Data

[bistromath007]

"Oh, and it would be nice if the US government would not make it so damned difficult for me to start a proper ISP."

You just mentioned the gun that's being used.

Re:Big Data

[rahvin112]

The lie you have bought into is that destination traffic is the same as transit traffic.

The whole point of peering agreements is to stop one provider from piggybacking on another transit providers network to reduce their costs. The agreements are structured so that to reach various end points they transit the traffic as closely as possible to the destination then hand it off to the hosting network rather than hand it off at the first available point and allow it transit the other networks system.

This whole arrangement falls flat on it's face when one of those transit providers is also the major destination route for millions of customers. ISPs that provide residential service always have unbalanced traffic arrangement because the customer almost always requests more data then they send. As long as L3 and Cogent are handing this destination traffic off to Verizon at the closest possible peering point for their subscribers then Verizon shouldn't be able to request the the traffic be balanced.

The problem is that unregulated market forces have allowed monopoly providers in local markets to combine with the very limited number of Tier 1 network operators resulting in the almost immediate abuse of monopoly by the Tier 1 portion of the network leveraging the monopoly side of the residential ISP business. There is rather simple solution to this problem. Bar any ISP that offers services directly to residential customers from owning or operating long haul national networks. If Verizon was forced to separate their Tier 1 transit business from their Residential ISP business (as in either divesting the assets or separating the company into two distinct companies) the problem would be solved almost immediately.

Businesses with monopolies will abuse them, that's the whole point of regulating free markets, because without that regulation you will end almost immediately with companies abusing market position and breaking the free market. Free markets don't stay free without regulation, particularly businesses with massive capital start up costs such as residential ISPs. Without regulation you end up with Verizon's Tier 1 network business leveraging the monopoly residential ISP traffic to extract rent from competing providers. This is a rent the market would not support without the monopoly or with regulation to prevent it's abuse.

Re:Big Data

[mrcpu2009]

The level of ignorance in the above post pleases me.

Re:Big Data

[JWSmythe]

So?

I used to run a big adult site. We wanted servers closer to the customers for speed. We made enough that we didn't really care about the connection costs. We'd put up server farms around the world where it suited our customers best.

We owned every piece of equipment in our cabinet or cage (depending on the location). The provider equipment ended at the fiber they dropped to us, and the power outlets.

Netflix was hosted with Amazon for a while. A couple years ago, they claimed to have started their own CDN.

Their own CDN site talks about putting Netflix gear out for free. So they are basically saying they want the free ride. No one gets rack space, power, and connections for free. The right thing to do would be to lease the space like everyone else does.

But hey, they're loving to cry about being treated unfairly. They are the loudest ones about it. Honestly, other than speed complaints that are usually a fault, not a conspiracy, I don't know of anyone else talking about the same thing.

It is possible that the world is ganging up on Netflix. It happened to Cogent, more than once. That was mostly they refused to pay on their contractual obligations.

Re:Big Data

[Wycliffe]

They don't want to pay for bandwidth anymore.

What's so unreasonable about this? Netflix isn't wanting this for free, they are wanting peering agreements.
Basically, they are saying, let us run fiber directly to you so that:
      1) Our customers get a faster connection
      2) Your customers get a faster connection to us.
      3) Your customers are no longer bogging down your internet connection with traffic to us
      4) Your customers get a faster connections to the rest of the internet
      5) You don't have to buy bigger pipes to the rest of the internet therefore saving money.
etc...

It's a win/win for all involved. There is no reason money needs to be continually exchanged as it's now a private
lan between the two companies and I'm sure Netflix would gladly pay for the hardware.
The only reason they don't want to peer with netflix is because they feel like they own the customers and
are willing to hold their own customers hostage in the hopes that netflix will cave.
Netflix unfortunately is not critical enough to do the opposite. (i.e. peer with us or your customers
can't use netflix) as netflix actually has competition unlike the people they are trying to peer with.

Re:Big Data

[mcrbids]

Their own CDN site talks about putting Netflix gear out for free. So they are basically saying they want the free ride. No one gets rack space, power, and connections for free.

I know a guy who is a network engineer at a regional ISP. They are ecstatic about hosting Netflix gear "for free" because of all the money they save! Despite the consensus here, bandwidth isn't free, it's a huge expense. And their largest use case is Netflix. By hosting the Netflix servers at the data center, they cut their network traffic by something like half.

It's a pretty big deal for them.

Re:Big Data

[Shatrat]

No one gets rack space, power, and connections for free.

It's not for free. The ISP gets a serious reduction in network congestion as a result. I'm a network planner for a national ISP in the US and deploying these caches has seriously cut down on our network load. For the cost of space and power for this cache I regained capacity on the network which would have cost 100s of thousands of dollars to build. You've fundamentally misunderstood the benefit to the ISP of deploying these. The only ISPs that don't deploy these are the ones that also get a lot of revenue from video such as Cable and FTTH providers. They don't WANT to reduce the congestion because it boosts their IPTV revenue.

I'm shocked!

[Livius]

In the absence of governments preventing them quasi-monopolies will act like quasi-monopolies?