Net Neutrality: Where The Money Goes

As we all know, Google and Verizon have reached a private agreement to for Google to pay for priority shipping of its bits over Verizon's networks. Both companies are getting beat up for that agreement. Google is getting beat up because they have long been proponents for net neutrality and have turned their back on the wireless side. Verizon is getting beat up because they are Verizon. But the pernicious FUD that is spread about Net Neutrality is appalling. It started long before October 2009, when the FCC rules were proposed, and hasn't stopped since. Net Neutrality doesn't stop providers from doing business. It does attempt to stop them from doing business unfairly.

Henry Blodget at Business Insider writes in "Stop Moaning About 'NET NEUTRALITY' -- Of Course ISPs Should Be Able To Charge Higher Rates For Premium Traffic," that Verizon should be allowed to do so. Blodget's argument that service providers build their own networks and should be able to use them as they see fit is misguided. Let's follow the money. I pay Verizon for my Internet access (I am both a FiOS and a wireless customer). For that fee, I get a certain amount of bandwidth to the Internet. I understand that Verizon can't guarantee the amount bandwidth that I receive--I even understand the technical reasons why they can't--but I pay for access. Google, or any content provider, also pays for their Internet access to one or more service providers. Their deal is rather different than mine; they get service level agreements and guarantees, and they pay more for it. Still, we are all paying for access at the edge of the Internet. Update: Greg Knierieman pointed me to a 2009 Wired article "YouTube's Bandwidth Bill Is Zero. Welcome to the New Net"  that indicates Google bandwidth costs may be zero due to peering relationships. If that is the case, then they are paying in kind.

I pay less than Google because I use less bandwidth. Google pays more than me because they use more bandwidth. Hey, that looks like consumption-based pricing, don't it? If I really wanted to get my shorts in a bunch, I'd point out that both Google and I pay for that bandwidth whether we use it or not. The point is, everyone pays to transport bits from here to there, right? Yes and no.

The Internet is just an interconnected network of networks. Even though I connect to Verizon, and Google connects to Level 3, if I trace a route from my home to Google.com, I end up at a host on AOL after traversing Verizon, Level 3, and then Google's own network. Through a series of acquisition in the 90's and 00's, Alternet is part of Verizon. So Verizon gets paid by me to carry traffic and Level 3 gets paid by Google to carry traffic. There are no middle men because Google is richly connected to the Internet. But if I go to a less well connected site, then a provider in the middle, say XO Communications, isn't being paid by me or the content provider.

XO isn't carrying that traffic for free out of the goodness of their hearts. XO is likely being paid by the downstream provider to transport traffic across XO's network, and depending on XO's relationship with Verizon, they are paying to transport or have a peering relationship in place. Ars Technica has a good intro to peering and transit in "How the 'Net works: an introduction to peering and transit," but I'll summarize. When two ISPs have a transit arrangement, one pays the other for access just like you and I do. When ISPs have a peering relationship, they agree to carry each others' traffic for free, the assumption being that peering is a fair and equitable exchange. In 2008, Cogent and Sprint disagreed on a peering agreement because the exchange between them was inequitable, and Sprint cut the peering relationship, which was then resumed a few days later.  The point is that the business model for the Internet is already in place, so everyone gets their cut of the pie. What Net Neutrality opponents want is a bigger share of the pie that we, the consumers and content providers, are already paying for. Blodget and other Net Neutrality opponents that argue the business case (as opposed to the political case) seem to think this is a good idea. Blodget uses--incorrectly, I might add--an analogy of shipping packages: "Imagine if the Post Office (or FedEx, or UPS, or DHL, or any trucking or transport company) were legally prohibited from charging more for delivering some stuff sooner than other stuff. Ridiculous, right? Yes, ridiculous. Those shipping and transport companies spent billions of dollars building their transportation networks. They have every right to charge whatever the market will bear to deliver stuff via them," Blodget says.

That is a woefully incomplete analogy. You see, we don't pay those services to ship the packages from one location and then pay again to deliver packages another location. We pay them once to ship packages to a destination. We do pay for faster delivery and we may even get a guarantee of faster delivery. Faster delivery, lower prices, notification--those are all service differentiators that customers use when they choose a shipping company, but we still only pay once to ship the package. Likewise, with Internet access, we all pay once for access anywhere. Opponents to Net Neutrality would have content providers paying two or more times (to the destination service provider, and any intervening service providers) for priority service. Google can afford to do this, but what about start-ups and SMBs?

I pay for my access to the Internet through Verizon. Google, or other providers, pay for their access to the Internet through their providers. We all pay proportionally more or less based on our bandwidth consumption and our guarantees. The middle men get paid or are reciprocated in kind. But when I pay for my access, I am paying for access to the whole Internet equally. I am not paying for access to part of the Internet or for degraded access to some parts of the Internet. Bandwidth is a scarce resource. Wireless bandwidth is scarcer still. Prioritizing some traffic because a company paid for the prioritization over other traffic from companies that didn't pay will be detrimental to me and other consumers, and will be detrimental to start-ups that can't afford to compete on priority access like Google can.

That is not to say all prioritization is bad. In the original FCC proposed rules, there was a specific exemption for traffic engineering that was intentionally, vaguely worded because the definition of accepted traffic engineering principles changes over time, which was something I pointed out then. We know that time-sensitive traffic like gaming, VoIP, IM and other interactive applications need low latency, and networks should prioritize them along over bulk file transfer traffic like e-mail, FTP or peer-to-peer, etc. That is fair and equitable to everyone. If service providers want to offer enhanced services to customers that don't impact traffic to and from the Internet, then they should be free to do so. I'm all for it, but not at the expense of open access to Internet resources. It doesn't matter if the transport is wired or wireless. That is the crux of Net Neutrality.