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[ NNSquad ] Re: "Is a more expensive Internet a good thing? About Comcast and Level 3"

DaveB - thanks for the numbers the belie Comcast's claims.

So we get back to the basic question -- why do we tolerate a conflict of
interest in which the transport provider and the content provider are the
same company? I'm not sure this even make sense for Comcast -- what happens
with XFinity and NBCU start generating traffic that goes out again?

The Zoom telephone certification problem reminds me of Carterfone. As long
as we have a tightly coupled silo we shouldn't be surprised to see hurdles
to connecting to a silo. We saw a very different situations with 802.11n as
devices were released with early specs. As long as they were clearly marked
the buyers could make their own decisions as to their comfort level with
early releases.

By decoupling the transport from the content we can then have each market
use an appropriate business model. Transport would be infrastructure and
then we could have new innovations in the content business as we see with
Netflix taking advantage (in the positive sense) of available capacity. If
it weren't there it would stay with DVD delivery. Of course that competes
with Comcast's business and, surprise surprise, Comcast happens to find
something wrong in how their Content Delivery Network is used. A CDN bakes
in a purpose..

I could go into detail on all the different aspects but we get back to the
basic problem with the idea that we must by services in order to get fiber
and radios -- more at http://rmf.vc/?n=Demystify where I peek behind the
curtain to debunk they idea that there is anything behind the curtain around

-----Original Message-----
From: nnsquad-bounces+nnsquad=bobf.frankston.com@nnsquad.org
[mailto:nnsquad-bounces+nnsquad=bobf.frankston.com@nnsquad.org] On Behalf Of
Lauren Weinstein
Sent: Tuesday, November 30, 2010 11:35
To: nnsquad@nnsquad.org
Subject: [ NNSquad ] "Is a more expensive Internet a good thing? About
Comcast and Level 3"

----- Forwarded message from Dave Farber <dave@farber.net> -----

Date: Tue, 30 Nov 2010 10:14:19 -0500
From: Dave Farber <dave@farber.net>
Subject: [IP] Is a more expensive Internet a good thing? About Comcast and
Level 3
Reply-To: dave@farber.net
To: ip <ip@listbox.com>

Begin forwarded message:

> From: Dave Burstein <daveb@dslprime.com>
> Date: November 30, 2010 3:16:20 AM EST
> To: Dave Farber <dave@farber.net>
> Subject: Is a more expensive Internet a good thing? About Comcast and
> Level 3

> Dave
>    Comcast says Level 3 should pay because they send more traffic to Level
3 than the other direction. There's an enormous amount of disinformation
coming from all sides, that "the Internet will die" to "this is just an
obscure peering problem. These are not the Droids you are looking for. Move
along." Some thoughts:
> 1-    Most important: Overall download to upload on broadband in now 3:1
to 5:1 and becoming less symmetric. Every backbone provider to every
broadband telco/cableco is asymmetric and getting more so. (That even
applies to AT&T and Verizon despite their broadband customers, because the
imbalance is  strong.)
>     So this is about charging everyone, not any particular issue with
Level 3. Level 3 is by far the largest backbone, by Renesys figures three
times the size of AT&T or Verizon. Every backbone will be in a range of
upload:download similar to the consumer ratio and have to pay.
>     If Comcast, Verizon, and the other Big 8 impose this rule, most of the
traffic to 80% of U.S. homes will be charged.
> 2- Comcast and the other carriers charging could be a good thing if much
of the benefit were passed along to consumers in turn. Economists have a
"two-sided market" model that with strong competition much of the benefit
would be passed on. Cisco and other lobbyists have been ignorantly applying
the theory where competition is weak and it doesn't apply.
>      With the local telco/cableco controlling 95% of U.S. broadband
customers, I believe competition is weak and most of the benefit will go to
company profits. Costs of delivering broadband service continue to go down
every year while prices generally go up. With strong competition, prices
would likely move down with costs.
>     Cable broadband according to John Hodulik of UBS and Craig Moffett of
Bernstein has margins of about 90%. I'd include more of the network overhead
but still find margins of over 70%. I do not believe increasing those
margins important. I do believe keeping Internet costs down is a good thing.
> 3- Bandwidth is cheap but not free. Usage is increasing. If bandwidth
costs were increasing significantly, I'd be much more open to ways to charge
more. Fortunately, Moore's Law has been bringing the cost of bandwidth down
very rapidly as well. Volume is up while cost per bit is down, both
25-40%/year. They've been about equal every year for almost a decade.
>      Comcast, Cisco, and AT&T are all noting a slight drop in the rate of
traffic increase. Congestion according to Comcast is now significantly
reduced, with "far fewer than 1% of customers affected by traffic
management." Even then, Comcast says they reliably provide 7 megabits down
even to the affected customers.
> 4- The total cost of bandwidth is far too low to explain substantial
bandwidth charges, less than $1/month/customer at large carriers like
Comcast. That's 1% to 3% of the $40/month charged. Again, if the charges
Comcast wanted were in line with the related costs, I'd be much more
sympathetic. I wrote "Comcast's Fair 250 Gig Bandwidth Cap" because at that
level usage is costly and a charge is fair. But this isn't about cost of
service; it's about converting market power into income.
> ---------------
>      Ed Whitacre said "They're not going to use my pipes." His successor
Randall Stevenson told Wall Street the same thing. I thought they would
become the key test, but Comcast instead is the stalking horse. Level 3
picking up Netflix inspired them to look at how they might charge. The
company's purpose is to make more money, so if they see an opportunity they
take it.
>      The question is whether this is good for the Internet and the
country. The FCC Chair owes us a close look and the courage to act if this
is as costly for consumers as I think it is.
> db

----- End forwarded message -----