Thursday, February 03, 2011

"The Internet’s edge is thickening, and its core is diminishing”


Another really interesting report from the Information Technology & Innovation Foundation (ITIF), this time on some of the ramifications of the increasing growth in delivery of video over the Internet.

The starting point for Now Playing: Video over the Internet is the recent dispute between Level 3 and Comcast over the Internet peering capacity needed to support Netflix streaming. Level 3 have won the contract from Akamai to deliver streamed video from the Netflix service (which "offers both on-demand video streaming over the internet, and flat rate online video rental (rental-by-mail) of DVD-Video and Blu-ray Disc in the United States and Canada (streaming only)", according to Wikipedia).

The dispute arose when Level 3 "asked Comcast to make300 Gigabits/second of bandwidth available for its free and exclusive use within the Comcast network, and Comcast responded that it would only provide the transmission capacity if Level 3 agreed to pay for it", according to the report, which goes on to illustrate how this dispute illustrates not only the impact video is having on the nature of the Internet but also how this instance throws some aspects of the net neutrality debate into sharp relief. For example, on the steps being taken to ensure that video can be delivered successfully, keeping pace with ever increasing demand:
“…Internet operators have already taken some very significant steps to ensure that the Internet doesn’t collapse under the massive new load that’s just around the corner: Content Delivery Networks such as Akamai and Limelight Networks have installed video servers in colocation centres and Internet Exchanges (IXs) as close as possible to the ISP networks that carry bits to the last mile, where the users are. These servers attach to ISP networks through a few feet of cable, not across the long-haul links that have been the source of Level 3’s traditional revenue stream. (They make use of long-haul links, but mainly to seed their servers with movies that will typically be downloaded hundreds or thousands of times without any further perturbation of the long-haul network.) Colos, as they’re called, exist to make this kind of interconnection fast and cheap, and succeed because distance drives cost in network economics. ISPs install routers in as many colos and IXs as possible, the better to keep their costs low and their performance high, so all the CDNs need to do to reach them is connect through a common Ethernet switch in the colo center. Arguably, CDNs bypass the Internet; at least, they bypass of the Internet backbone in the interest of better service and lower cost.”
This has sometimes been referred to as "the flattening of the Internet" as more and more traffic is delivered over its own bespoke infrastructure in this way. The main bone of contention in this instance is the fact that Level 3 will be delivering far more traffic to Comcast than it receives, undermining the principle of traditional peering arrangements:
“There’s nothing wrong with Level 3’s requesting 300 Gbps of bandwidth from Comcast at the best price it can get, but there’s an established convention around the Internet for network-to-network traffic exchange that Level 3 doesn’t want to follow: You only get free access to a network if you can offer equal value in return, something Level 3 can’t do because their network isn’t extensive enough to do as much work for Comcast as Level 3 expects Comcast to do for it...When some Network A connects to a Network B of similar size, scope, utilization, and capacity, they’ll typically interconnect with no money changing hands; this is traditional Settlement-Free Interconnection (SFI) or peering. But if Network A is a small regional network and Network B has international scope, undersea cables, and massive redundancy for quality and reliability, Network A will pay Network B a volume-based transit fee for moving its packets.”
According to the report, the key driver here is (or should be) the economic one, with the money following the direction of the dominant traffic flow:
“The traditional way that operators have resolved questions about payment for interconnection is to measure traffic between the two networks and to have the money follow the direction of the dominant traffic flow. If Network A sends more traffic to Network B than vice versa, Network A pays. This works for the networks that have historically served as backbones, carrying traffic for others but not generating any of their own. The “sender pays” model works well enough to capture the economics of long-haul networking even though it doesn’t single out all the cost factors; ensuring that money flows in the same direction as traffic has been a good-enough simplifying assumption to keep the backbone ecosystem healthy and competitive.”
There's more:
“…every packet (except the malicious ones) on the Internet flows because someone asked for it—that fact alone doesn’t entitle anyone to free transit...Network costs are determined not only by how many packets a network carries, they’re heavily shaped by the distance the packets must be carried; long pipes cost more to build and operate than short ones…So even in the case where two networks hand off equal numbers of packets to each other, the network that carries them furthest has higher costs and is entitled to a larger share of the fees, all else being equal. This discrepancy has to be accounted for in any rational peering or transit agreement, as those that are public all do. This idea also serves the public policy goal in which rewards flow with investment; the more extensive the infrastructure, the greater the fees it should generate.”
And this is the report's key point about the changing nature of the Internet I think:
“While the Top 10 networks in terms of traffic in 2007 were all transit providers, two networks have entered the Top 10 as of 2010 that are not traditional transit networks, Google and Comcast. The Internet’s edge is thickening, and its core is diminishing.”
In response to Level 3 crying "foul" on the basis of net neutrality to the FCC, the report has this to say:
"Netflix has made a business calculation and determined that the stars are aligned such that playing the net neutrality card now will provoke the most favorable reaction from Comcast and the FCC: The agency is struggling to assert net neutrality rules against the objections of a hostile Congress, Comcast wants the FCC to approve its merger with NBC Universal, and Level 3 needs to succeed in the CDN business because the transit business is declining. Regulators should not buy the claim that paying for transit from a few widely separated colos to ISP end users distributed across three-quarters of a million route miles is unfair."
And in conclusion, on what an appropriate regulatory response should look like:
"The firms are capable of working out this dispute on their own; other CDNs have been able to reach satisfactory terms with Comcast and the other ISPs, and Level 3 is not doing much different from what Akamai and Limelight have done in the past. The FCC would do well to step back and let the firms work out the terms of an agreement among themselves."
To my mind, the key role of regulators in relation to the net neutrality is ensuring transparency at all levels - that way the customer understands what he or she is paying for, and providers have the ability and agility necessary to innovate to bring new services to market (like CDNs).

Any claim that CDNs violate net neutrality seems a red herring to me. CDNs are about additional, dedicated capacity; they aren't about reserving capacity to prioritise certain traffic, a point well made by ZDNet's David Meyer in relation to BT's ContentConnect service his blog (also referenced in this previous post).

All of which, in a roundabout sort of way, continues to underline the importance of maintaining a dedicated broadband infrastructure for education, just as Akamai and other providers of CDN services do for their customers?

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