Heads ISPs Win, Tails You Lose (And a way to fix it)

Our prior posts (here, here and here) discuss the game of “chicken” some ISPs are playing with the Internet—refusing to alleviate Internet congestion unless Internet access tolls are paid. Like “heads I win, tails you lose,” it is a game these ISPs win every time. Either arbitrary tolls are paid, driving up their rivals’ costs, or they are not, and the congestion they allow significantly degrades their rivals’ service quality. The rules being considered in the FCC Open Internet proceeding would perpetuate this – even if fast lanes are not allowed in the last mile of the Internet, if they are allowed where the Internet connects into these same last mile networks, then the ISPs can continue to anti-competitively interfere with Internet content delivery. We are glad to see that the FCC has recently said it would look into this continuing interconnection problem.

What should consumers think about this? And what solutions would Level 3 propose to address the issues?  

When you buy Internet access, you expect access to the whole Internet. You also make your ISP the only way any of that Internet content can reach you. Here is a high level diagram of the Internet:

Internet Diagram

As we have said in our prior posts, some big ISPs use this monopoly over the only connection to you to degrade the quality of Internet content providers unless they agree to pay the ISP arbitrary access tolls. These ISPs apparently want the Internet of tomorrow to look a lot different than it looks today. Today’s Internet is so rich and robust because it evolved in a free and open environment – where nimble start-ups innovated and the best models won (Google, Facebook, Twitter etc.). But the future of the Internet is not so rosy if some of the biggest ISPs get their way. While many ISPs work hard to offer good service to their customers, some of the largest rely instead on anti-competitive practices and artificial scarcity to maximize their own profits at their customer’s expense. Where will that leave consumers in the Internet of tomorrow?

  • If ISPs can prioritize their own content (like affiliated video services), impose arbitrary tolls and/or slow the Internet for anyone who refuses to pay them, ISPs can effectively dictate the content and applications you receive. But ISPs should not decide what content you get – you should.
  • The remarkable growth of the Internet has shown that an open market and level playing field reward the best content and applications, resulting in a much better experience for consumers than ISPs would offer if we let them stack the cards in favor of their own service offerings. A world where a small number of large ISPs control Internet content would significantly reduce the innovation and growth we have enjoyed so far. We can’t think of many content web sites or services launched by network operators that have gained any significant consumer adoption. Nor have they built and successfully launched many successful online video services, educational services, gaming services, news services, email services, social media services . . . and the list goes on and on.

But if they choose, ISPs can grab more money and control of the Internet, as they face no real competition.

  • For many Americans, even in urban areas, there’s little competition for the kind of robust broadband service that can stream video without hitting a data cap pretty quickly. In fact, consumers can count themselves lucky if they even have a choice between two real options for high-speed broadband: the local cable company and the telephone company. And, unfortunately, even where two choices exist, if both of them congest your Internet access (this has happened), you have no congestion-free option.
  • And as we have told the FCC, some ISPs demand tolls from us (simply to access the consumers on their limited last mile networks) that exceed the fees we charge some customers to reach every destination on the Internet worldwide. Plus, ISPs’ profits are rising even though their user satisfaction is poor. All clear signs of limited or no competition or consumer choice.

The truth is, if you favor a free and open Internet, want all the content you want to see, and want the Internet to be even better going forward, then you also should favor limited regulations that keep these last mile bottleneck ISPs in check. So what simple, reasonable rules would do that?

As guiding principles, the Internet should remain free and open, and subscribers should be able to access the content they want and have paid for without unreasonable interference from their ISP. That means:

  • ISPs can’t discriminate in their networks between different sources and types of content, including favoring their own content, whether that discrimination is by charging fees, prioritizing some content over other content or imposing data caps that don’t apply to the ISP’s own offerings.
  • ISPs must maintain interconnections with the rest of the Internet that are resilient, uncongested and secure. If ISPs can’t discriminate among traffic once it’s on their network, they also can’t erect a toll booth for traffic as it arrives.
  • No one should get a “free ride” from the ISP. ISPs must interconnect with content companies and backbone providers without charging them a fee, but those companies must also do their fair share of the work to deliver content to the ISP.

How can these principles be implemented? The FCC is part of the way there, with proposed “Open Internet” rules focused on the last-mile. But to fully protect the free and open Internet, the FCC should also adopt simple, straightforward interconnection rules:

  1. If Internet content is delivered locally – in the ISP’s local market closest to the location of the ISP’s customer requesting the content – the ISP must accept the traffic and deliver it to its customer without charging a fee. The ISP could require the aggregation of some minimum amount of traffic to avoid an obligation to interconnect with “everybody”.
  2. The local interconnection locations can be selected by the ISP, but they must be reasonable. At a minimum, for example, each location must allow content delivered there to reach a stated minimum number of the ISP’s customers, and the location must be served by several different (and therefore competing) metro transport service providers.
  3. If interconnection capacity is congested at any interconnection location, it must be promptly augmented.

These rules are not complicated, and they work. We know this because Level 3 already has similar arrangements with several ISPs. And the solution is good for everyone:

  • Consumers get reliable, uncongested Internet access to the content of their choosing.
  • The ISPs eliminate costs by not having to carry traffic from region to region, just on their local networks, which are presumably adequate to accommodate the speeds they have promised to their paying subscribers.
  • Content providers can buy services from multiple, competitive providers who can deliver content to the ISPs’ network over uncongested links. The ISPs remain free to compete for this business as well, they just must do so on a level playing field.
  • Internet backbone providers continue to compete with one another (and the ISPs) for connectivity around the Internet and to the ISPs, but without the barriers created by artificially congested interconnection links into the Internet’s last mile.

Finally, the above rules should be a backstop only, and parties should be free to work out alternative, commercial arrangements. One such option is “bit-mile” interconnection, discussed in our IP Traffic Exchange Policy and which we have also implemented commercially with several companies.

We remain open to alternative regulatory backstops (as well as modifications to the rules we propose here), provided they allow for fair, reasonable, uncongested, resilient and secure interconnections with bottleneck ISPs. Unless and until interconnection is resolved, the Open Internet rules will not effectively solve the problems they seek to address, and interconnection points congested by some ISPs will continue to be the weak link in the Internet.

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Michael Mooney

I serve as General Counsel, Regulatory Policy here at Level 3 Communications.

13 thoughts on “Heads ISPs Win, Tails You Lose (And a way to fix it)

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  3. It remains my understanding that Level 3 has filed with the FCC for an equitable bit pricing formula which takes into account the long distances our network carries content being requested by ISP subscribers inside the “last mile.” It continues to be mind boggling that the FCC has not gutted the archaic regulatory scheme which dominated Plain Old Telephone Switches–and is still being used for internet traffic today–including Peer 2 Peer mechanisms that grant free rides across our backbone at the speed of light and with great expense–$40 Billion cost new PP&E excluding the ongoing twtc acquisition.

    From this perspective, these huge capital investments continue to not realize the investment returns shareholders must expect for risking so much capital in revolutionizing the global internet for all global eyeballs to see. This is clearly an affront to U.S. citizens specifically; in favor of The Status Quo whom you identify as ISP’s posing as telecom and cable companies.

    The American People continue to be held for ransom by captured political bodies at all levels of government. The longer they take to rationalize the power of our internet by disallowing the types of behavior and polices being implemented in the last mile by these ISP’s, the longer America will remain at risk for being a technological leader innovating and assisting in raising living standards everywhere without regard to borders. Let freedom through capitalism ring loud everywhere!

    Can you educate us when these regulatory bodies are going to wake up, and establish a new pricing system that accounts for bits being delivered from creation to consumption according to distances travelled? Otherwise, I would like to witness similar bureaucrats creating pricing schemes for the public’s advantage in order to receive things like their requested packages by FedX anywhere around the world for free also!

    Free might be good, but at whose expense and why? This silliness holding our internet back must end!

    • My answer is “hopefully sooner rather than later, as the current system is broken.” We spend a lot of time and energy in Washington and elsewhere in an effort to educate people about this.

  4. Pingback: Level3 Wants FCC to Impose ISP Interconnection Requirements - Telecompetitor

  5. So as a UK based ISP where do I sign up for my free Interconnection with Level 3?

    We’re really happy to sign up to your three rules that you are recommending that the FCC introduce and promise not to charge you to deliver you and your customers content to our end users.

  6. A question for Level 3 – as a backbone provider, they interconnect with content companies. If traffic from content company A to Level 3 increases by 10X over a period of time, I presume Level 3 would augment the capacity of their connection with content company A. However, I also presume that Level 3 would increase the fees charged to content company A – i.e. interconnection fees are volume sensitive, because there are costs associated with accommodating higher volumes. Company A could also seek services from another backbone provider, but in no case would they not see an increase in the fees they were charged because their volume of traffic increased by 10x.

    If this is accurate, how is the argument for interconnection at the ISP any different?

    • There are 2 main reasons it is different. The first, the ISPs have an effective monopoly over their subscribers. Transit providers like Level 3 do not. Second, we provide a service. ISPs do not—they attempt to charge their arbitrary tolls simply for the privilege of accessing the consumers they control the only access to, and provide no service in the process. As we have said in other posts, the ISPs costs to fix the congestion issues that are occurring are trivial (under $10,000), and the fix could be accomplished in 5 minutes. What these ISPs are doing has zero to do with costs, and everything to do with them leveraging their last mile monopoly over access to consumers.

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