On Transit and Middlemen

March 31st, 2014 by · 4 Comments

In a Forbes piece yesterday, Hal Singer took the role of transit backbones in the world’s internet infrastructure and reduced it all the way down to the status of ‘middlemen’.  And of course, middlemen are undeserving of protection from the FCC when it comes to ensuring a healthy marketplace since they don’t actually do much of anything anyway, right?   Be careful what you wish for.

In reality, the networks he refers to as middlemen all have their own last mile too to the enterprise and data center. It’s just not the consumer last mile that requires a reasonable rate of return for a healthy marketplace.  But on their global IP backbones they carry much of the world’s internet traffic, and they do it on infrastructure that 15 years after the bubble still gets taken for granted.  The last mile to the consumer is definitely difficult to scale, but we should remember that it’s only one mile out of hundreds or thousands that most bits need to travel.

There’s a reason that the likes of Comcast, Verizon, and AT&T are these days minor players (if that) in the world of internet transit.  They don’t like it and don’t invest in it because it’s a thankless business, one that there isn’t much if any margin to squeeze out of.  It’s not transit operators that are milking the available dollars in the sector for massive profits while complaining about their business model’s viability.   Squeeze those transit backbones that remain too hard and you will, in fact, risk breaking the internet.

I’m not arguing for regulation at the moment (and in fact just some transparency would do), just a bit of mutual respect.  Building the infrastructure of the internet is not a zero sum game, it never has been.   Let’s not let this argument devolve too far.



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Categories: Government Regulations · Internet Traffic

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4 Comments So Far

  • Ben Graham says:

    The gauntlet needs to drop and pay the Internet backbone transit providers by the bit-mile. Do I hear a pin drop – do you hear me now says Level 3.

  • Nope says:

    “It’s not transit operators that are milking the available dollars in the sector for massive profits while complaining about their business model’s viability.”


  • Cable Apologist says:

    Meanwhile, Netflix CEO thinks large access ISPs should be compelled to provide settlement-free interconnection essentially to anyone, anywhere, and (in complete disregard for every detailed peering policy on the planet), claims that well-behaved ISPs are already doing so.


    It seems fairly simple: Big Content needs multiple relationships with both 1) Big Access ISPs and 2) Transit Providers to Less Big Access ISPs. All of the above will rationally negotiate favorable interconnection terms using every tool in their bag, as they always have. Regulation will make this all more expensive for everyone except the lobbyists. 😉

  • Anon says:

    The cost of any communications service is disproportionately held in the last mile, be it fibre, DSL, or 3G/4G. The international long haul piece is extremely low margin and a small percentage of the overall cost – no more than 20-40%, even on a private network, and less on a public network like the Internet. It’s easy to dismiss the tier 1/transit-free ISPs as “middlemen,” but without them being there then the world would be a series of ISP islands. Someone has to build and maintain all the bridges, and it’s an expensive and thankless task.

    At less than 40c/Mbit for transit in developed markets and 10G point to point in Western Europe down to around $1K MRC, surely the OTT guys could start investing in actually paying for the bits they used to force others to carry for free. Google has been building out huge networks to support its business, and now Microsoft, FB and Twitter are doing the same. Shouldn’t Netflix and the others start taking some responsibility for the true costs of their service?

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