Network Neutrality is Dead: Netflix deal with AT&T; VZ Throttling- FCC?

Netflix announced Tuesday that it had agreed to pay AT&T for a direct “peering” connection to AT&T’s network. The two companies arranged the deal this past May and have been working since then to connect their respective networks.

AT&T had been pressing Netflix to pay for an upgraded connection between their networks since at least March when Netflix asked for a free peering arrangement.

“We reached an interconnect agreement with Netflix in May and since then have been working together to provision additional interconnect capacity to improve the viewing experience for our mutual subscribers,” an AT&T spokeswoman said in a statement.

“We’re now beginning to turn up the connections, a process that should be complete in the coming days,” Netflix spokeswoman Anne Marie Squeo said.

AT&T and other broadband ISPs believe that Netflix should bear the cost for the recent surge in video traffic. Netflix replied that broadband providers should be responsible for making sure that their subscribers get the content they are viewing online in a reliable and consistent manner.

Netflix, as well as Google’s YouTube, provides a regularly updated video quality report that ranks the speed of ISPs.  AT&T’s services have typically ranked low on Netflix’s list, although Verizon’s services haven’t fared much better since it signed a peering agreement with Netflix.

[Internet traffic flows between different networks generally in one of two ways, through transit, in which a smaller network passes its traffic through a larger one to connect to the broader Internet; and peering, in which large networks connect with each other. Traditionally, smaller networks paid larger ones for transit services, but peering didn’t require any kind of payment from one company to another. Instead, both networks are responsible for their own costs of interconnecting.]

When there was still some notion of network neutrality, interconnection deals between content and network providers/ISPs were free.  But now, broadband providers require fees paid to them. Some fear that moves like this could have a serious problem on startup content provider (which may not be able to pay those fees), especially if the content they provide is used by many over the Internet.  That negates the concept of network neutrality.

Netflix has protested the move to these so-called “paid peering” arrangements.  The company has noted that it is sending to ISPs’ customers only the data they are demanding in the form of streamed movies.  Furthermore, it has argued that the only reason ISPs can demand to be paid for peering is because of the limited competition for broadband access.

Despite its protests, Netflix has now announced three paid peering relationships. Earlier this year, it inked deals with both Verizon and Comcast. If AT&T were to block or throttle Netflix, many of its customers would have no other place to turn for Internet access. The company has called on the FCC to ban paid peering arrangements as part of a broader move to curb ISP practices as part of a new, stronger net neutrality policy.

Net neutrality advocacy groups are pushing  the FCC to intervene in these situations and stop broadband providers from asking for interconnection fees.  Yet the FCC has done nothing and hasn’t even finalized its new rules for net neutrality.

John Naughton wrote in The Observer:

“The principle that all bits traversing the network should be treated equally was a key feature of the internet’s original design. It was also one of the reasons why the internet became such an enabler of disruptive innovation. Net neutrality meant that the bits generated by a smart but unknown programmer’s application, for instance the web, file-sharing, Skype and Facebook, would be treated the same as bit streams emanating from a giant corporation.  Neutrality kept the barrier to entry low.”

Slowing down or “throttling” Internet traffic has been another contentious issue for the FCC.  In a July 25th letter to Verizon CEO Dan Mead, FCC Chairman Tom Wheeler voiced his objections to plans Verizon announced last week to begin throttling LTE customers on unlimited plans that use an exorbitant amount of data. Verizon said the change will only affect about 5 percent of its users and it is being done in the name of network management.

Chairman Wheeler took issue with how Verizon described the issue, stating that he believes Verizon may be misinterpreting the FCC’s rules on network management.

“Reasonable network management concerns the technical management of your network; it is not a loophole designed to enhance your revenue streams,” Wheeler wrote, saying that it is “disturbing to me that Verizon Wireless would base its network management on distinctions among its customers’ data plans, rather than on network architecture or technology.”

Wheeler noted that legitimate network management purposes could include:

“Ensuring network security and integrity, including by addressing traffic that is harmful to the network; addressing traffic that is unwanted by end users (including by premise operators), such as by providing services or capabilities consistent with an end user’s choices regarding parental controls or security capabilities; and reducing or mitigating the effects of congestion on the network.”

Opinion: 

We wonder what enforcement power the FCC has to stop wireless (or wire-line) carriers from throttling users data throughput.   If a subscriber has a unlimited data  plan, why aren’t they notified about throttling before they sign up and once they are coming close to exceeding their monthly limit of bytes streamed or downloaded from the Internet?

It seems the Wheeler-led FCC is prepared to let the industry settle these contentious issues and play a very passive role.  That’s not what communications regulator should, IMHO!