For the providers mentioned in David Meyer’s July 11, 2013 GigaOm article, there are two sides of the story relevant to the Internet service provider’s business model. The incumbents believe their revenue is being negatively impacted by backbone providers who enter their markets, especially ones whose networks are equipped with a video content delivery mechanism. As a result, they practice their own form of protectionism. But, amidst the industry chatter, the question remains: What is the impact to consumers?
Like backbone providers, many incumbents possess a moderate amount of backbone infrastructure to include Trans-Atlantic, Trans-Pacific and Trans-Latin in some cases, however, in comparison the scale does not compare to that of a backbone provider. While the backbone provider argues that their cost resides in the middle portion of their network, the incumbents argue that theirs is in the last-mile portion. The diagram below outlines the differing business structures under which each party operates.
In considering each of the incumbent challenges, Level 3 has submitted proposals to address the economic impact associated with the “proliferation of video traffic” consumption in the last-mile. This proposal includes a concept called bit-mile peering, which specifies the sharing of network cost burden. Such an arrangement is one of the most equitable approaches for delivering subscribers the highest quality internet experience possible in a scalable, reliable and secure fashion, therefore enabling a vastly improved performance benefit for consumers vs. the traditional traffic exchange ratio model currently employed by incumbents.
Instead of the being limited by the last mile limitation, the bit-mile peering approach increases revenue potential for the incumbent and reduces cost for the backbone service provider. In the end, the consumers are the benefactors in that moving to this model means better performance As Mr. Meyer’s article points out, until incumbents and backbone providers can find common ground and solve for this important issue, the quality of services a customer receives is compromised and the consumer has and will continue to be the “loser.”
We can do better. If incumbents and backbone providers will make an effort to understand each other’s interests and commit to creating options that are responsive to those interests and the overall market demands, it would ensure a more scalable approach to growing data consumption and a better consumer experience overall.