What you're missing is that the transit provider is selling full routes. The access network is selling paid peering, which is a tiny fraction of the routes.
So, at the end of the week, I *had* been paying $10/mb to send traffic through transit to reach the whole rest of the internet. Now, I'm paying $5+$4+$4+$5+$2, or $30, and I don't have a full set of routes, so I've still got to keep
Considering they charge on a $per/mb basis I don't think its just routes they are selling. It looks a lot like they are selling bits. From the perspective of a content provider it looks like they swivel chair most those bits to access networks for delivery. That "tiny fraction of routes" on the access networks make up most delivered content. In total network size the access networks are larger although less spread out globally. Being globally connected is useful but it doesn't make a legitimate case for having exclusive rights to charge for content being delivered in North America. If you are planning to serve large scale data over oceanic fiber it's a strong selling point but that's not the case here. If instead of $per/mb traffic delivery you want to get into arbitrary justifications access networks have more directly assigned IP addresses than transit networks. I'm not making the case that a middle man should never be used, I'm making the case that they shouldn't be used where there isn't a requirement for one. Bypassing the middleman is generally better for everyone but the middle man. paying the transit provider as well at $10. If this is the math you are using to justify your stance it's probably worth reconsidering. You ignore that each of those if sent through transit would have been $10 so the cost of $5, $4, and $2/Mb represent a savings of $5, $6,and $8. Why would you add them? Sure there are factors you have to evaluate like putting yourself under a minimum commit with $transit or if the amount of traffic is worth peering over but you would generally have to make those evaluations for peering anyway. The real difference is the volume of traffic needed before a $2/mb savings is worth peering directly for is higher than if the savings were the full $10 but that doesn't mean its never worth it. There is a difference between saying "I did the math and transit remains the cheaper option" and saying "Paid peering would save us both money and improve performance at the same time but we refuse to do it anyway on principal". The concept of fair gets brought up a lot when talking about the ability of a startup to come in to compete against bigger players in the content space but really what do you think the impact is if the largest established content providers peer freely and smaller newcomers only have paid options available for traffic? Some other things I also want to get to:
On Vi's analogy vs Amazon prime
One major different I think people overlook is overusing Amazon prime would mean buying too many things from Amazon. Even when you purchase through companies selling through Amazon they get a cut of the sale and some of that I assume gets applied to covering any additional shipping costs not covered by Prime. If Internet traffic used the same model would ISP's receive a portion of proceeds for ad revenue on places like Youtube or a percentage of Netflix subscription fees? I'm not making the case that thats the model that should be used I'm only pointing out that analogies are best to break things down into simple terms for people but have diminishing returns in usefulness when getting into details. The other problem with Vi's analogy is the shipping company delivers to the driveway of the customer where a more real life scenario would be something closer to Amazon having a distribution center in that city, and both Comcast and FedEx are already both sitting idle in the parking lot. Amazon pays FedEx to give the package to Comcast in the next parking space, who then drives it to the customers house. Comcast says to Netflix, since I am the one driving this from the parking lot to the customers house, why not just pay me instead of paying FedEx more money to just put it on my truck? Amazon says, but FedEx will deliver the package to France if I tell them to. Comcast says, but you don't even serve france out of this distribution center, and I am not asking to be charged for all packages, only the ones I deliver instead of FedEx. Amazon says, you are right, we have technology to give your packages directly to you and stuff going to France to Fedex, and it would be best for both of us to do it, but unless you'll deliver my packages for free I'm going to keep paying FedEx to just keep loading them on your truck. Comcast says have at it, there are 5 trucks for FedEx to load freely now but if you need more you have to compromise with us on a deal that works better for both of us. Amazon says, when we are done with you in the media we won't need to compromise.
Government regulation of interconnects
I agree with Owen Delong on this who said "That set of regulations would be utterly impossible to meaningfully enforce because so much of it depends on subjective evaluation." and gave some reasons why. I also think that in order for the government to meaningfully review all interconnect relationships between companies there would be more legal scrutiny within companies needing to justify the process, forms would need to be filed with government for review, some reviewing entity would need to perform a traffic study potentially needing access to netflow data, and "tier 1" if it would continue to exist would likely require expensive certification to come with the responsibility and there would need to be some process for new companies seeking "tier 1" status to apply for it. We would be left with a pile of costs, nothing beneficial gained from it, and an advantage to companies with more lawyers than engineers.
Broadband is too expensive in the US compared to other places
I have seen this repeated so many times that I assume it's true but I have never seen anything objective as to why. I can tell you if you look at population density by country the US is 182nd in the world and the average broadband speed (based on OOKLA: http://www.netindex.com/download/allcountries/) is 30th in the world. South Korea that is well known for its fast broadband speeds has a density of 505/km vs the US at 32/km. We have about 1/15 of the population density and about 1/2 the average broadband speed. Hong Kong, Singapore, Netherlands, Japan, Macau etc. all have more than 10x the population density in the US so definitely not all countries with fast broadband make for a fair comparison and there are likely fewer that do. The UK is only beating the US by 2Mbps but has a population density of 262/km. So while its a fair assessment that broadband in the US is very bias to ignore some of the other factors involved. Another mistake I see people keep making is in comparing the cost of broadband in the US in $USD to other countries around the world. The cost of broadband in Estonia is only about $30/month. OMG, I can't believe broadband is cheaper in Estonia! What people ignore is everything is cheaper in Estonia, the average household income in Estonia is $14k vs $55k here. By that measure broadband is more expensive for families there than it is in the US. This is another point people repeat without bothering to qualify. This would be like my grandfather comparing the costs of a candy bar from back when he was a kid to today but ignoring inflation.
Broadband companies are making money hand over fist
This may be true but I have honestly not attempted to index a bunch of major companies and compare their profit vs revenue so see if broadband companies are really on the top of the pile as people making this point imply. I have to confess to being skeptic that the people making the claim have done this either.
ad hominem attacks
Inevitable but no, I don't have financial gain in any of this. My stance is essentially that if ISP's are forced to choose between higher prices, metered billing, or adopting paid peering then paid peering is the best solution of those 3 and pushing for legislation prohibiting it only serves to take what I think is the best solution off the table. Especially in cases where content providers are monetizing a service sold over the top I think resistance to this option is a bit stubborn and I'd like to see the industry solve the dispute without the government taking the opportunity to land grab for expanded power over the Internet. If they pick just ratcheting up pricing for unlimited plans in auto pilot as costs rise it will only harm the "Broadband is too expensive in the US compared to other places" numbers and I think people have been pretty clear in their objection to metered billing. Metered billing would also probably hurt content providers more than paid peering would so it's the worst option all around. I read complaints about the way things are handled all the time and complaining is easy but proposing better solutions is harder. On Wed, May 14, 2014 at 4:11 AM, Matthew Petach <mpetach@netflight.com>wrote:
On Sat, May 10, 2014 at 8:04 AM, Rick Astley <jnanog@gmail.com> wrote:
[...]
The reality is an increasingly directly peered Internet doesn't sit well if you are in the business of being the middle man. Now if you will, why do transit companies themselves charge content companies to deliver bits? How is it fair to be in the business of charging companies to receive their bits and hand them to a settlement free peer on the hook to deliver them, but not fair for content to just bypass the transit company and enter a paid peering agreement with the company delivering the bits? In this case paid peering is mutually beneficial to both companies involved and is typically cheaper for the content company than it would cost to send that traffic over transit.
What you're missing is that the transit provider is selling full routes. The access network is selling paid peering, which is a tiny fraction of the routes. If I pay transit provider X $10/mb (i know, not realistic, but it makes my math work) to reach the entire internet, it might seem reasonable to pay access network C $5/mb to hand traffic to them, and bypass the transit provider, avoiding potentially congested links.
But then access network A decides they want to cut out the middleman as well--so they do the same thing, run their ports to transit provider X hot; to avoid that, I can pay the cheap price of $4/mb to reach them.
Now access networks F and D want to do the same thing; their prices for their routes are $4 and $5/mb, respectively.
Finally, little access provider T wants in at $2/mb for their routes.
So, at the end of the week, I *had* been paying $10/mb to send traffic through transit to reach the whole rest of the internet. Now, I'm paying $5+$4+$4+$5+$2, or $30, and I don't have a full set of routes, so I've still got to keep paying the transit provider as well at $10. Depending on port counts, locations, and commit volumes, your "typically cheaper for the content company than it would cost to send that traffic over transit" has flown completely out the window. It could even end up being many times more expensive to handle the traffic that way.
In order for the costs to work out, you'd really need to apply a formula along the lines of C(n) <= T(n) * C(t) where T(n) =fraction of traffic volume destined for access network X C(t)=cost of transit (ie, full routes, reachability to the entire internet) C(n)=cost of paid peering to access network X
So, if you're an access network and want to charge for paid peering, and you represent 1/20th of my traffic, there's no reason for me to pay more than 1/20th of my transit cost for your routes; otherwise, it's more cost effective for me as a business to continue to pay a transit provider.
I'm constantly amazed at how access networks think they can charge 2/3 the price of full transit for just their routes when they represent less than 1/10th of the overall traffic volume. The math just doesn't work out. It's nothing about being tier 1, or bigger than someone else; it's just math, pure and simple.
Matt (currently not being paid by anyone for my time or thoughts, so take what I'm saying as purely my own thoughts on the matter, nothing more)