Level 3 Calls Out Verizon Directly on Peering Upgrades

July 18th, 2014 by · 14 Comments

At least one piece of the simmering interconnection dispute over Netflix data bottlenecks has been getting clearer lately. Following Netflix’s ‘crowded network’ warning message to subscribers in June, last week Verizon put out a piece demonstrating that its last mile wasn’t congested at all. And yesterday, Level 3 turned that around in a blog post, saying that Verizon’s explanation is more of an admission. 

Verizon’s ChartVERIZON-NETFLIX-CHART Level 3’s Chart 


Level 3’s prior comments have been more general, not naming Verizon quite so explicitly as doing this — not that it was much of a secret.  Indeed, putting Verizon’s and Level 3’s charts together shows quite explicitly that the reason for slow Netflix streaming speeds to its customers is a lack of upgrades at their peering connections. It also shows that Verizon’s network has plenty of capacity to handle the extra data they would get if they upgraded, and that the lack of upgrade is a business decision not based on the actual costs of that upgrade.

In other words, it’s a pressure tactic aimed at forcing payment for traffic.  We all knew that of course, and in the world of peering and transit it is hardly a new thing.  But perhaps what all this public attention has done is make it so the FCC really can’t ignore such things in the context of network neutrality and the leverage held by the last mile. Verizon’s remaining position here is simply one of traffic ratios and their role in peering connections, i.e. that anybody sending too much OTT video to them will see traffic ratios rise and trigger a refusal to upgrade peering connections.  The only way out will be to pay them directly (in paid peering) or pay someone else who does (a CDN) or they’ll use peering upgrade delays to slow it down.

I’ve long maintained that in a world of streaming video and asymmetric consumer broadband connections, using balanced traffic ratios as a basis for peering makes no mathematical sense. Nor does blaming traffic on one side of a two-party exchange of data transaction for which both parties already pay. Doing so places the industry in a downward trajectory toward a power imbalance in which a last mile monopoly can set its own prices for certain types of data (e.g. video) until they go too far and regulators step in and do it for them.

Yet Netflix *should* be paying for paid peering, and it should want to based on the better performance it would get by cutting out the middle men and all the hops in between. That’s why Akamai has done so well for itself in a world where IP transit backbones are so rarely a significant money-making proposition.  Netflix’s position of free interconnection for all, even those who don’t actually have a network to build and maintain, is just as non-sensical. The likes of Level 3 and Cogent and their other customers are just caught in the middle.

Meanwhile, the FCC is getting bombarded with comments on its latest net neutrality foray. Most of them are uninformed and will never be read, but the point is that people really are watching. And the power really does lie with them, which is precisely why Verizon felt so provoked by Netflix’s ‘crowded network’ warning message as to speak publicly about their network traffic for once.

The industry as a whole — last mile, middle mile, backbone and content — needs to sit down and work out a new paradigm that works for all. Because if it doesn’t and enough of the public feels its internet is under threat, then the eventual solution will be a political one imposed from above. And that really would be a disaster.


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Categories: Government Regulations · ILECs, PTTs · Internet Backbones · Internet Traffic

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14 Comments So Far

  • Tobias says:

    Ultimately if you can’t agree your peering equals, the way forward is an independent arbiter who can assess each party’s “cost per bit”, with an all-encompassing allocation of capex, netex and opex which is as fair/ achievable as possible.

    I’m not pretending this is a straightforward calculation, and I’d expect endless haggling around this process. But if both bodies sign up to the independent body’s decision being final, then an outcome will be achieved and the world can move forward.

    But of course this process would cost money and most people are reasonable enough to come to agreement without the need for such an arbitration process.

  • VisualBill says:

    Level3, simply post all your peering point graphs with VZ, show the world you are indeed correct…

  • Mr.Garrison says:

    Or Netflix could just remove Level 3 altogether and directly connect with Verizon. I mean, their petulance to shell money in order to improve their service to their end user is laughable if they insist it’s about the greater principle of net neutrality. This drama has been dragging on it’s ridiculous. Both announced April their working on a direct peering agreement, what’s taking them so long???

  • mhammett says:

    I want it to be as painful as possible, so that I can swoop in and pick up customer, providing an alternative that doesn’t suck.

  • Jared says:

    Level3 offered to pay for the cards, the cross connects, and even to install them. A Level3 managed Verizon network!

    • Convergencia says:

      Does this mean if Level 3 is my provider and I’m over utilized on my circuit, they’ll give me additional circuits for the cost of the equipment? Sign me up!

  • Solutions Seeks Problem for LTR says:

    CDNs pay ISPs for access. Peers don’t.

    When peering ceases to be mutually beneficial (e.g. because one party entered into the CDN business), obviously the other party is going to cease having interest in peering.

    What is stopping Level3 from entering the oh-so-lucrative first/last mile business? Municipalities are bending over backward to grant new franchises to FTTP players…

    • mhammett says:

      and when last mile provider Verizon bought MCI, MCI’s network ceased being a peer to the other carriers.

    • Anonymous says:

      whats stopping them is the cost. They just spent 7B and the next 3 years to integrate yet another company.

      • Solutions Seeks Problem for LTR says:

        Exactly my point. Level3 can’t or won’t make the infrastructure investment to actually deliver content to end users, so in the meantime they’ll just publicly whine about the practices of the carriers who already have invested (VZ says about $23B on FiOS so far).

        • Jill says:

          VZ investment is in the last mile. They get to wrap around charges for that for all their competitors, plus their own traffic. To say they invested with the implication that it’s pure is a little misleading. At the very least, it’s not pure.

        • mhammett says:

          L(3) in the residential last mile is a stupid idea.

  • Jill says:

    We are left with all this baggage due to the original breakup of Ma Bell being written by Ma Bell, for Ma Bell’s benefit. I don’t fault the concept since regulators and particularly Congress does not have the deep knowledge required to project future outcomes, but this is what you end up with. The current telecom landscape is a very small number of regional monopolies on the last mile. Essentially, it’s 2 1/2 companies that control 80% of the market. There’s no real competition when most all of the “competitors” need to lease access over the last mile from that small clique. And the last mile is the most expensive to create. Building out smaller bandwidth relative to backbones through the most densely built environments is orders of magnitude more expensive than building a backbone through rural areas, and the vast empty spaces between metropolitan areas.

    So we are left with this – a PR battle and urination contest between predictable rivals.

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