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A Net Neutrality Riddle

If Netflix has to pay tribute to Comcast, then shouldn’t Comcast pay tribute to cloud storage firms?
March 21, 2014

Here’s an interesting way to look at the often abstract topic of “net neutrality.” Let’s say you are an online storage vault like Carbonite or Dropbox, which has 200 million users and a $10 billion valuation (see “Hiding All the Complexities of Remote File Storage Behind a Small Blue Box”).

Now, further assume that your company’s major technical activity is data inhalation. Petabytes of pictures, video, and so forth are uploaded to your servers every day. And you can’t help noticing that the major sending party is a Comcast, the giant Internet service provider (ISP).

Outrageous. They’re paid by their customers, and now they are sending you all of this data, forcing you to upgrade your connections to handle the upload volume. So in addition to whatever subscriptions you charge your customers, shouldn’t you also charge Comcast a toll for sending you all that traffic?

It’s an absurdity. But it’s an intriguing piece of the argument that Netflix CEO Reed Hastings articulated in a blog yesterday on why he feels the United States needs a strict form of net neutrality, the idea that all bits should be treated roughly equally, with no tolls for certain kinds of content or for traffic that moves more in one direction than another.

Big ISPs such as Comcast argue that network congestion is inevitable; surely they can’t be expected to pay for special equipment just to serve a few companies at a few periods when those companies send massive amounts of data (like when half the country sits down to stream the Netflix series House of Cards). They want companies like Netflix to pay. And Netflix, which has been chronicling slower and slower speeds their users were experiencing thanks to ISP congestion, recently agreed to pay Comcast a so-called “interconnection” charge to speed things up.

But Hastings said this was done with great reluctance, and that there was little basis for interconnection fees based on heavy one-way traffic:

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.

Hastings’s argument comes as the U.S. Federal Communications Commission is working through possible new draft regulations that would control or ban discrimination in data-delivery, following a pair of court losses (see “Net Neutrality Quashed: New Pricing, Throttling, and Business Models to Follow”). In addition to ISP toll-charging, a number of companies are dreaming up ways to charge content-providers extra for premium service: AT&T’s sponsored data would allow a business like ESPN to subsidize its bits so you aren’t worried about watching on your phone, and wireless carriers are working out “fast lane” technology (see “Akamai’s Plan for a Wireless Data Fast Lane” and “Verizon Plans a Fast Lane for Some Apps”).

One simple argument in favor of net neutrality is that if people are paying lots of money for fast Internet service, they should get the speeds they are expecting, no matter where the data is coming from. After all, if some providers put a heavy load on ISPs, it’s also prompting people to pay those same ISPs for fast connections in the first place. Some who argue against strict net neutrality say it would block subsidized approaches to getting people online in the first place (see “Around the World, Net Neutrality Is Not a Reality”).

Current and future information-intensive industries need clarity on whether a high-speed and reliable information infrastructure will actually be there for them, and how much success might end up costing them.

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