Wednesday, January 5, 2011

netflix, level3, comcast & 'network neutrality'

This Gizmodo story captures perfectly all of my issues with network neutrality.  It starts out with the usual hysteria,  claiming that there's some giant threat to the Internet from Evil Corporations.  (Hey, remember the days of "OMG they are gonna tax our emails!").

After some time to ponder the issue, however, Gizmodo groks the situation:

Indeed, recent reports suggest that Netflix is responsible for a fairly absurd amount of bandwidth, and as Wired points out, the contracts that dictate who is responsible for carrying what traffic are largely left undisclosed to the public. Comcast's statements (unsurprisingly) shift the debate from one of net neutrality to the esoteric and largely uninteresting business of service providers negotiations.

But let me 'cast' this situation in a slightly different light.  Let's imagine that 20% of Comcast's bandwith is being gobbled up by Netflix users.  Now, the infrastructure that Comcast has to build out is expensive stuff.  Under 'network neutrality' regulations, Comcast is no longer allowed to pass on any of this cost to Netflix.  What happens?  Does Netflix's business continue to grow?  No.  Does Comcast build out additional network to support services like Netflix?  No.  At least not as quickly as they might have.  And if they do, who pays for it?  Well, all of Comcast's customers pay for that buildout.  Including the ones that don't use Netflix.

Even if Netflix realizes that this is bad for their business, they are not allowed to voluntarily give Comcast money to help defray the cost.

In an unregulated environment, Netflix helps defray Comcast's costs, and the users that actually gobble up all that bandwidth help to pay for it.

So which situation is preferable:

1) network neutrality: netflix is not a viable business model, because the bandwidth to support it is not there.
2) network neutrality: netflix still works, but all of Comcast's customers are forced to subsidize those customers that use it.
3) unregulated: netflix works and grows, and comcast grows.  Everybody wins.

Notice that I haven't yet mentioned the fact that bittorrent traffic probably consumes even more bandwidth.  Once again, all of the ISP's customers are forced to subsidize the minority that are saturating the network with (mostly pirated) bittorrent content.  This is actually an interesting problem, because although bittorrent itself is relatively easy to block, its successors will not be.  Newer protocols will almost certainly involve some kind of cloaking/encryption, which will be deliberately indistinguishable from legitimate encrypted content.

Services like Netflix and iTunes represent legitimate high-bandwidth services, the kind that will eventually make pirating less attractive.  So we are in the midst of a shift of traffic from bittorrent to netflix/hulu/itunes/etc, and I think most people will agree that is a Good Thing.  But network neutrality regulations may well stifle this transformation.  I don't know about you, but I don't like paying $100+/month to subsidize johnny-down-the-block's massive porn collection.

But oops, you have no choice.  Because network neutrality means that Comcast isn't allowed to filter out bittorrent, even if it consumes 80% of their bandwidth.  So $80/month goes to johnny-down-the-block, and $20 goes to your own connection.  Yea! The Internet is Saved!