Something New to Say About Network Neutrality? A presentation at Public Domain(s): Law, Generating Knowledge in the Information Economy Michigan State University, East Lansing, MI October 2, 2014 Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law Penn State University Web site : Blog site:

2 Analogies Used to Explain How the Internet Works analogies and models provide a frame of reference for understanding how the Internet works. Several analogies and models provide a frame of reference for understanding how the Internet works. It’s a cloud: It’s a network of networks:

3 Analogies Used to Explain How the Internet Works It’s a series of tubes: It’s part of a broadband communications supply chain:

4 Analogies Used to Explain How the Internet Works It’s a hierarchy of protocols:

5 The Internet Ecosystem Consider the Internet as the product of seamless interconnection between servers, routers and broadband subscribers using the telecommunications transmission networks of many, often-unaffiliated operators. We should concentrate on the interconnection and compensation negotiated between various operators that go by several different names: Internet Service Provider (Tier-1, Tier-2, retail) Content Distribution Network, Peer, Paid Peer, Transit Customer, Lessee, etc. Source: George Ou,

6 Source: George Ou, Digital Society, between-broadband-and-cdn/

Four Phases in Internet Development 1)Incubation--government as anchor tenant and underwriter, first through the United States Defense Department and later through the United States National Science Foundation along with research institutes throughout the world (1980s-1995); 2)Privatization--governments eliminate financial subsidies obligating contractors to assess whether and how to operate commercially ( ); 3 3)Commercialization—private networks proliferate as do ventures creating software applications and content that traverse the Internet. The “dotcom boom” triggers excessive investment and overcapacity ( ); and 4)Diversification—after the dotcom bust and market re-entrenchment, Internet survivors and market entrants expand the array of available services and ISPs offer diversified terms, conditions and rates, including price and quality of service discrimination needed by “mission critical” traffic having high bandwidth requirements, e.g., full motion video content. ISPs and even content providers can use deep packet inspection to identify traffic for “better than best efforts” routing and other forms of prioritization at one extreme and blockage/throttling at the other. 7

What’s New About the Diversification Phase? Actual Marketplace and Technological Convergence—Internet mediation of most information, communications and entertainment options; incumbents vertically and horizontally integrate in response to marketplace success of some entrants, e.g., Netflix. Proliferating Types of ISPs, e.g., Content Distribution Networks (“CDNs”) concentrate on providing “one-stop” management of downstream content. Extraordinary Growth in IPTV—traffic streams become more asymmetrical with “television everywhere” delivery to 4 screens (tv, pc, smartphone and tablet). Consumer Intolerance for “Appointment Television”—access anytime, anywhere, via any device and in any transmission/presentation format. Increasing Disputes Interconnection and Compensation Disputes --carriers operating in the now fully commercialized Internet pay close attention to traffic flows and now limit peering (barter) to equals in terms of bandwidth capacity, locations served, subscriber population, etc. Smaller ISPs now pay for transit, or self-peer. 8

Consumers Want Conduit Neutrality Except When They Don’t Most consumers favor ISP neutrality and the application of “best efforts” routing protocols. In the absence of congestion, the status quo provides a level competitive playing field between content providers and distributors in terms of “access to eyeballs.” New bandwidth intensive applications, such as IPTV and OTT increase the probability of congestion and degradation of service quality, even in the absence of deliberate efforts by an ISP to “throttle” bandwidth hogging subscribers, or to disadvantage competitors. IPTV consumers have a quick pain threshold for QOS degradation; full motion video cannot become a slide show, or lose packets. IPTV consumers welcome QOS enhancements, including ones that offer “most favored nation” prioritization of “mission critical” bitstreams, e.g., live, “must see” TV programming such as sporting events and award telecasts. Companies, such as Akamai, Limelight Networks and Level 3, have generated no controversy when they enhance traffic delivery from the Internet cloud to retail ISPs for final delivery. The debate has focused on the “last mile.” 9

ISPs Want to Offer Paid Prioritization ISPs want to profit from their substantial investment to provide downstream delivery of traffic. Retail ISPs have tiered and raised rates, including surcharges on upstream ISPs and content sources. Retail ISPs have greater negotiation leverage in light of more downstream than upstream traffic. Last mile access options remain limited: a DSL, hybrid fiber-coax, or fiber carrier, and a cable modem carrier. Satellite options are slower, more expensive, have downloading caps and latency (signal delay) challenges. 4 th Generation terrestrial wireless currently has a 1-2 Gigabyte monthly cap in most plans. Consumers choose only one carrier to provide all access to and from the Internet cloud. Opponents of paid prioritization expect ISPs to nudge, or push content and application providers to paid prioritization by generating artificial congestion rendering standard service inadequate. A reverse forensic investigation of the Netflix-Comcast dispute cannot readily determine the cause of congestion. Was it subscriber “binge viewing,” or induced scarcity of delivery ports? 10

Netflix-Comcast Once an advocate for network neutrality, Netflix has opted for higher QOS through a paid peering arrangement with Comcast. Netflix directly interconnects with Comcast at many locations thereby reducing the number of networks and routers typically used. Virtually overnight Netflix traffic congestion problems evaporated thanks to lower latency and faster delivery speeds. Paid peering, providing “Most Favored Nation” treatment of specific traffic streams, has triggered a vigorous debate over what constitutes reasonable price and QOS discrimination. Netflix’s payments to Comcast are offset in part by reduced or eliminated payments to CDNs, but the accrual of more revenues for retail ISPs raises concerns about rising bottleneck/last mile control. Will surcharge demands become the new normal even for venture with modest traffic volumes previously accommodated by the standard, best efforts model? 11

Consequences of the Netflix-Comcast Deal Pressure to Upgrade--More “better than best efforts” routing options with the possible risk that content sources with far less volumes than Netflix might face severe pressure to migrate from standard delivery. Higher Broadband Profit Margins--Broadband rate increases through tiering transmission bit rate and download allotments. Likely substantial narrowing in the gap between wireline (200+ Gbytes) and wireless (250 Mbytes to 2 Gbytes). More Subscriber Options for Avoiding Download Debits--ISPs will “soften the blow” of stingy download caps with expanded opportunities for “sponsored data” by content and service providers who pay the retail ISP in lieu of it metering the download. ISPs Demand More Incentives to Upgrade--ISPs will leverage network upgrades in exchange for better interconnection terms with content providers, CDNs and upstream carriers. More Interconnection Compensation Disputes—Lots of finger pointing when QOS declines especially for ventures with far less traffic volume than Netflix. 12

The FCC’s Regulatory Quandary Continues The FCC has failed twice in attempting to find a way to assert lawful jurisdiction. The Commission cannot impose Title II common carrier responsibilities on information service providers, including ISPs. However, the D.C. Circuit Court of Appeals provided some room for the FCC to impose rules and regulations short of common carriage, e.g., transparency, truth in billing, good faith negotiations. Unclear how far the FCC can stretch Sec. 706 authority (assess broadband market penetration and promote access if necessary) and the Cellco precedent (FCC can require wireless data roaming, albeit on commercially and technologically reasonable terms). Consumers can become quickly agitated when real or artificial congestion slows IPTV/OTT content delivery. Identifying the cause requires significant technical forensics and the FCC (even with unquestionable jurisdiction) cannot remedy the problem quickly. The FCC wisely refrains from interfering with retransmission consent negotiations and got reversed when it rejected Comcast’s decision to assign an unaffiliated sport channel (covering tennis) to a more expensive and less viewed programming tier than an affiliated sport channel (covering golf). The stakes and impact are much greater when a biased Internet favors certain types of content sources based of corporate affiliation, or ability to pay a surcharge. 13

Conclusions and Recommendations The FCC and other national regulatory authorities (“NRAs”) will continue to struggle to find a lawful way to impose ground rules on ISP interconnection and compensation arrangements. NRAs will try to rely on commercial negotiations, but also may impose good faith, transparency, truth in billing and reporting requirements, especially for “better than best efforts,” specialized arrangements. NRAs may use a complaint resolution process to address disputes. ISPs appear to have solidified their control over the Internet ecosystem, despite the conventional wisdom that content rules. When content demand triggers congestion, the content provider and its subscribers end up paying more. ISPs will frame content prioritization as a necessary to manage a scarce resource, while opponents will accuse ISPs of creating scarcity and rationing a resource that previously managed to deliver content without surcharge or congestion. Increasing advocacy for reclassification of Internet access as a public utility, common carrier service. However, in the U.S. common carriers can engage in “reasonable” discrimination. ISPs probably can offer paid traffic prioritization, provided it’s available to all “similarly situated” carriers and content providers. 14