ISPs Put the Squeeze on Content Distributors, Level3 Charges

Six major ISPs providing residential broadband services are refusing to augment their networks unless content providers pay more, according to Level3.

Five of them are in the United States and the last in Europe. While Level3 has not named them, it has repeatedly mentioned writing to AT&T about broadband throttling.

The six “are deliberately harming the service they deliver to their paying customers. They are not allowing us to fulfill the requests their customers make for content,” Level3 said.

“Traffic volumes are becoming problematic,” Mike Jude, Stratecast program manager at Frost & Sullivan, told the E-Commerce Times. “Significant delay can be experienced even now, and it will only get worse.”

The Gist of Level3’s Accusations

Global IP traffic has more than quadrupled in the past five years and will further triple over the next five, hitting a compound annual growth rate of 23 percent between 2012 and 2017, Cisco has predicted.

All ISPs must augment, or upsize, their networks to cope with this, Level3 said, but the six bad ISPs have refused to do so unless the content providers using their networks — Level3 is one — agree to pay them to do so.

“This is not only unreasonable on its face, but it is entirely inconsistent with published reports indicating that returns on [investment] for ISPs are excellent and are expected to improve even further,” Level3 said. These ISPs “break the Internet” and are betting that content providers will cave in to their demands because they have no other option.

A number of content providers have. Netflix in February agreed to pay Comcast for a direct connection to the latter’s broadband networks after a bitter dispute. Google, Amazon and Yahoo have been doing so for some time.

Level3 said it wrote AT&T about this issue in 2011, and has written to other ISPs since, offering to “hammer out a fair, equitable, scalable and resilient network architecture, but to no avail.” It also has repeatedly written the U.S. Federal Communications Commission.

A Level3 spokesperson was not immediately available to provide further details.

The ISPs’ Side of the Story

Perhaps the picture is not quite as bleak as Level3 is painting.

In 2013, telecommunications service providers boosted equipment purchases by nearly 4 percent, Infonetics Research reported. The major areas of investment through 2015 will include fiber-based wireline broadband.

AT&T announced in 2012 that it planned to spend US$14 billion over the next three years on broadband and wireless infrastructure. Of this, $6 billion would be for wireline initiatives.

“We should accept that companies must build additional capacity to handle [the exploding Internet] traffic,” AT&T Vice President Jim Cicconi wrote in March. Also, “business service costs are ultimately borne by consumers.”

In other words, Netflix and content delivery networks like Level3 will not be out of pocket at all.

“Strip away all the hyperbole and high principle, and what you find is rational business decisions involving reducing the cost of delivering content,” Frost’s Jude pointed out. “Level3 is behaving rationally and, if successful in its advocacy, would reduce its cost structures, increasing its revenues. Who wouldn’t do this?”

No Mercy for ISPs

The costs of augmenting networks need to be recovered, Mark Cooper, research director at the Consumer Federation of America, told the E-Commerce Times. Tariffs should be time sensitive and congestion sensitive, he added.

ISPs “don’t get the sympathy they deserve” because they have not been aboveboard, Cooper said. For example, the dispute between Netflix and Comcast “demonstrated everything we worry about — abuse of market power, control of bottleneck power.”

Comcast “never actually demonstrated the specific cost causation and designed a cost recovery mechanism to address that” in its dispute with Netflix, and that’s typical of ISPs, he remarked. “Given the history that has been going on, the presumption should be in favor of Level3, and ISPs should have to prove their case.”

Richard Adhikari

Richard Adhikari has written about high-tech for leading industry publications since the 1990s and wonders where it's all leading to. Will implanted RFID chips in humans be the Mark of the Beast? Will nanotech solve our coming food crisis? Does Sturgeon's Law still hold true? You can connect with Richard on Google+.

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