updated 11:55 am EDT, Sat July 26, 2014
FTC net neutrality letter addresses concerns about Internet 'hyper-giants'
In a letter filed with the US Federal Communications Commission regarding the pending net neutrality proposal, pro-cable company advocacy group The National Cable & Telecommunications Association (NCTA) believes that if the "fast lane" net neutrality proposal stands as is, then "hyper-giants" like Amazon, eBay, Netflix, Facebook, and Google could charge the cable companies to allow customers to access services, essentially holding Internet Service Providers hostage. The cable companies allege to have no defense against such tactics, and claim to lack a "practical ability" or the incentive to throttle said large Internet companies.
The comment by the NCTA, who represents Cablevision, Charter, Comcast, Cox, and Time Warner Cable, among others says that "Even if broadband providers had an incentive to degrade their customers' online experience in some circumstances, they have no practical ability to act on such an incentive. Today's Internet ecosystem is dominated by a number of "hyper-giants" with growing power over key aspects of the Internet experience -- including Google in search, Netflix and Google (YouTube) in online video, Amazon and eBay in e-commerce, and Facebook in social media."
The letter to the FCC also claims that "if a broadband provider were to approach one of these hyper-giants and threaten to block or degrade access to its site if it refused to pay a significant fee, such a strategy almost certainly would be self-defeating, in light of the immediately hostile reaction of consumers to such conduct. Indeed, it is more likely that these large edge providers would seek to extract payment from ISPs for delivery of video over last-mile networks."
The incredulous argument by the NCTA makes little sense, at face value. Should a company like Google prevent customers from accessing the service, should an ISP like Verizon not pay any "ransom" for subscriber access, then customers would likely flock elsewhere. The reverse statement isn't true -- if an ISP customer's Netflix speeds are hampered by an unwillingness by an ISP to provide sufficient architecture to do so, most US customers have no other option for broadband, and are in many cases forced to remain with a substandard quality of service, due to a combination of business deals and legislation.
Verizon also believes the "hyper-giants" are problematic for ISPs. It said that Internet behemoths have "undeniable power" to affect net neutrality, and directly complained about Netflix peering, saying that "Netflix has built its 'Open Connect' content delivery network to support its video service, and until recently it denied the highest quality video to end users whose broadband providers did not agree to host Netflix's servers directly on their networks."
Recently, information has surfaced, essentially proving that while Verizon is happy to take Netflix payments for network access, it is still failing to build out sufficient capacity for the best possible user experience. Internet backbone company Level 3 believes that Verizon's "issue" could be fixed "in about five minutes simply by connecting up more 10Gbps ports" at a cost of a few thousand dollars per card. With Verizon consistently making billions of dollars of profit per quarter, this shouldn't be an issue, but the fix has not yet been made, and will likely not.
Time Warner Cable said something similar to the NCTA's filing to the FCC. It believes that "it is more likely that some content owners might well seek payment from broadband Internet access providers as a condition of delivering their content - paralleling the business model that already exists [in the video distribution industry]. The Commission should not turn a blind eye to actual marketplace dynamics in developing open Internet protections."
Netflix CEO Reed Hastings addressed a situation like this in his quarterly earnings press conference. Hastings hypothetically asked "the question comes up - should we over time be charging ISPs for the privilege of carrying our data to their customers, and charging for that?"
Answering his own question, Hastings responded unequivocally "no." He said that he thinks "the Internet really has this different, much more open architecture than classic cable, where we meet in the middle, we bring the bits to where they want, we don't charge them, they don't charge us. Both sides innovate,. It's very open structure, and I think then you get more competitors for Netflix frankly, but what you get is this open vibrant system that the Internet has been so famous for, and that's really the tradition that we grew up in, and that we're trying to see carry forward, and I'm optimistic about it, frankly." Netflix does pay Comcast and Verizon money to facilitate connections to customers, with mixed results.