Fast Furious feature

Universal Pictures

Voices


We use the Internet an enormous amount. At home, we consume north of 150 gigabytes of data every single month; on the go, we consume 7.5GB of LTE mobile network data, in addition to an unknown amount of data via our office computer.

The Internet, amazingly, appears to work awfully well, considering the rapid increases in bandwidth consumption over the past several years (with one notable exception, the quality of out-of-home Wi-Fi). Honestly, we have more trouble accessing video-on-demand via MVPDs than we do streaming content via the Internet.

Yet there is a tremendous amount of focus on whether to or how to regulate the Internet to ensure its openness and foster innovation. These actions/inactions have the potential to impact every company we follow. While the FCC has not even laid out its formal plan yet, there has been a firestorm of criticism from technology companies claiming the FCC’s new policies will literally destroy the Internet and stifle innovation. There’s even a White House petition circulating.

Do fast lanes mean there are, by definition, slow lanes?

Starting with net neutrality, the key fear/concern from open Internet advocates is that enabling ISPs to create “fast lanes” is a disaster for innovation and creativity. Essentially, the belief is that creating fast lanes means the rest of the Web will be stuck in the “slow lane.” Sen. Al Franken’s comments from earlier this week make it sound like the entire Internet as we know it as at grave risk, based on the concept of fast lanes.

An ISP’s bandwidth is not fixed at current levels: As MVPDs shift to all-digital infrastructures, they have significant capacity to dedicate a larger portion of their “pipes” to broadband, which can meaningfully increase bandwidth available to consumers from today’s levels.

Think of bandwidth as a highway: If an entirely new lane is added at the ISP’s expense, that does not harm anyone riding along on the preexisting highway. We struggle to understand why enabling an “extra” HOV lane is bad policy that requires government regulation.

One should not simply assume that the creation of fast lanes of dedicated bandwidth forces everyone else who chooses not to pay ISPs, or cannot pay ISPs, into slow lanes. While those lanes may be slower than the fast lanes, they were slower with or without the fast lanes.

And if bandwidth-heavy traffic that would have traveled over the open Internet (adding to congestion) is offloaded onto a separate fast lane that does not impair the preexisting pipe’s bandwidth capabilities, it should actually ease congestion on the existing lanes, rather than create slow lanes.

The regulatory question is whether ISPs are intentionally harming the overall health of the preexisting pipe to force an increasing number of bandwidth-heavy content sites to seek paid fast lanes. If we end up with fast lanes occupying far more of the pipe because ISPs stop investing in the core “non-prioritized” pipes they provide consumers, the government will clearly need to revisit this issue.

Think of fast lanes like HBO and MTV

Net neutrality proponents continue to write that there is no way to create fast lanes without creating slow lanes. We fundamentally disagree with fast-lane skeptics. In fact, we suspect that many fast-lane skeptics have actually been using fast lanes and did not even realize it: ISPs across the country are delivering managed or specialized network services.

The FCC enabled managed services or specialized network services in its December 2010 Preserving the Open Internet order. (Note: This rule-making was mostly overturned by the courts earlier this year):

“In the Open Internet NPRM, the Commission recognized that broadband providers offer services that share capacity with broadband Internet access service over providers’ last-mile facilities, and may develop and offer other such services in the future. These “specialized services,” such as some broadband providers’ existing facilities-based VoIP and Internet Protocol-video offerings, differ from broadband Internet access service and may drive additional private investment in broadband networks and provide end users valued services, supplementing the benefits of the open Internet.

“At the same time, specialized services may raise concerns regarding bypassing open Internet protections, supplanting the open Internet, and enabling anticompetitive conduct.”

Managed service “fast lanes” are how VoIP works today on cable systems, and net neutrality proponents never complain. Beyond VoIP, Cablevision, Time Warner Cable, Cox and Comcast all have live, linear IP-video products that are delivered in the home as managed or specialized network services to a variety of devices.

For example, Time Warner Cable dedicates distinct bandwidth for its in-home TWC TV apps, no different than when it needed to allocate bandwidth years ago for HBO HD or MTV HD. Time Warner Cable is not harming or taking bandwidth away from its Internet product at all. What is happening is that the 6 MHz channels that historically were used for analog video are being repurposed in an increasingly all-digital environment, freeing up capacity for other uses.

The TWC TV content flows from Time Warner Cable’s digital center in Denver directly to households across their footprint on Time Warner Cable’s proprietary backbone, the TWC TV app‘s content never touches the open Internet (no peering, no interconnections). As a managed service, the TWC TV content can be delivered more reliably and in higher quality without impairing the Internet in any way.

hastings comcast

Complaints over managed service (fast lanes) last reared their head in 2012, when Netflix’s Reed Hastings called out Comcast’s Brian Roberts on his public Facebook feed for net neutrality violations.

Conceptually, if Netflix or any other company wants to pay Comcast or any other ISP to create a dedicated channel for their IP-based service that never touches the actual Internet, we have a hard time understanding why the government needs to impose regulations to prevent that. How can the government decide that adding VoIP is okay, or adding HBO Ultra HD is okay, but adding a dedicated Netflix IP-channel is bad?

Full disclosure should prevent bad behavior

Lastly, and maybe most importantly, the FCC has made clear that it will require full disclosure and accountability if and when it chooses to put in place “fast lane” paid access agreements. The essence of FCC Chairman Tom Wheeler’s comments last week at NCTA was that if the ISPs abuse their broadband opportunities and end up harming consumers, the FCC would not hesitate to invoke Title II regulation, which would be devastating to ISP public market valuations.

This essay is excerpted from two recent BTIG blog posts; read them in full here and here. (Free registration required.)

Rich Greenfield is a TMT research analyst at BTIG in New York. Previously, he was managing director and co-head of research at Pali Capital; earlier in his career, he worked at Goldman Sachs and Fulcrum Global. Reach him @RichBTIG and rgreenfield@btig.com.



8 comments
Nargg
Nargg

I could care less about fast lanes.  My ISP provides enough speed for 4K video.  What they DON'T provide is enough data without limits to stream 4K video, or any other media for the amount I'd like to.  Very anti-competitive.

mknopp
mknopp

Rich, it always interesting watching a politician speak, sort of like a train wreck. And you sir are a politician with this article.


"Adding 'Fast Lanes' Does Not Require Harming the Internet"

This is absolutely true. It doesn't require it, but that isn't the issue here, and never has been. The simple point of fact is that the telecos and cable operators have time and time and time again proven that they can't be trusted. Adding fast lanes doesn't require harming the internet, but to not harm the internet would require these ISP providers to spend money to keep from harming the internet. The bottom line on this is that adding fast lanes, which would bring in more revenue for already existing infrastructure, doesn't make as much economic sense as keeping what they have now and simply charging companies for the same access that they had before. If this just happens to slow down the parts of the internet that they aren't already charging for fast access, so much the better for their business model.


As for full disclosure taking care of any abuse what a load of @%$#$@!. Full disclosure only works as a restriction if there is a free market, and the one thing that none of you "fast lane" proponents seem to ever mention is that ISPs are far from a free market. The government already controls who can and cannot play in this arena. Cable companies mostly have exclusivity agreements with cities and cellular companies pay the government for exclusive usage of spectrum. So, you or I couldn't just decide tomorrow to setup a broadband ISP. Heck, even a giant like Google can't get free reign to come into many areas. When Google was running their contest for their fiber I wrote my mayor and told him to put up our town. The reply that I got back? We cannot do that since the local cable operator is putting in fiber and they have an exclusivity contract with the city.


So, want fiber in my town, you have one choice. Don't like that choice? Move or don't get fiber/cable.

 That is not a free market, and since it isn't a free market then any free market controls cannot be counted on to regulate.

gallde
gallde

Rich, you are ignoring (why??) the fact that many of us have experienced a drastic slowdown in our current access to Netflix, if not other premium video services. I pay Verizon FiOS mucho bux for a fiber-speed connection, but can no longer get Netfix at HD quality (could do a couple months ago), and it usually has interruptions to boot. If I used even 10% of my FiOS bandwidth, I could get the HD quality with no gaps. And, my connection tests at its rated speed. ERGO, Verizon is throttling Netflix -- whether they will admit it or not -- and thus blackmailing us into supporting the fast lane.

Dror
Dror

Rich -- how do you explain that the US has the slowest and most expensive broadband in the developed world?

Phillip Dampier
Phillip Dampier

Rich, your entire argument completely collapses when you consider this fact:


If cable operators offer the "meaningfully increased bandwidth" you suggest they will, there would be absolutely no business case to offer a paid fast lane because the cable operator's network would be more than robust enough to support the kinds of Internet applications you are talking about. If you want more bandwidth as a customer, you can voluntarily upgrade to a faster speed tier.


If cable operators are looking to get into the broadband scarcity business, which is exactly what happened with Netflix/Comcast's peering dispute, then Comcast can make a case that a company needs the fast lane they want to sell because the general Internet service they offer just won't cut it.


The incentive for Comcast to slow upgrades to its network (and where exactly will disappointed customers go? DSL?) to incentivize paid fast lanes is clear. So it is not to the customer's benefit that these paid fast lanes reduce traffic on the general Internet, because without traffic congestion, nobody would ever bother buying a ticket to travel on an HOV lane.


As for Comcast (and TWC) moving their TV Everywhere content to an intranet, that allows a convenient excuse to exempt that content from the arbitrary usage caps Comcast has slapped on Internet customers. If you use certain video game consoles to access Comcast video over their broadband connection, it doesn't count against your usage allowance. Does Netflix have the right to demand equal treatment? Of course not.


As a consumer, requiring providers to fully disclose how they intend to empty your wallet is hardly the solution that robust Net Neutrality enforcement would deliver. My credit cards and insurance companies disclose exactly how they intend to gouge me, but it sure doesn't make me feel any better.


Phillip Dampier

Editor, Stop the Cap!

http://stopthecap.com


Dormaj
Dormaj

Every ISP has finite bandwidth in/out, unless they increase/expand the number or speed of the fibre links/ports.  To believe that these ISP will build new fast lanes for their new paying partners before giving them dedicated fast lane bandwidth is a joke.  They will take from existing bandwidth and carve it out at the expense of those now in the more congested lane, if you will.  If customer demand grows for generic IP traffic (not VoIP or other proprietary solution) because Netflix streaming requests increase, let the providers bandwidth grow organically with their customer base to support their QoS goals and not at the expense of less privileged, non-special-agreement partners/sites.

krkeegan
krkeegan

@Dormaj  Completely agree, Rich provides no support for his contentions that ISP's will build "new bandwidth" to support the paid fast lanes, rather than just cannibalize it from existing or planned bandwidth.


Moreover, his example of current VOIP fast lanes only underscore the problem.  TWC dedicates bandwidth to its OWN VOIP product, yet Vonage is left in the generic slow lane.  Similarly TWC provides increased priority to its OWN VOD app, yet leaves Netflix in the generic slow lane.  Your own examples demonstrate that the few examples of non-neutral treatment that exist today are already 100% biased towards favoring the cable companies' interests over their customers'.


Rich, what incentives do ISPs have to improve the generic bandwidth in the future?  Why won't  ISPs provide 20% faster speeds for the generic bandwidth yet offer 300% speed increases for the paid internet?

freds
freds

@krkeegan @Dormaj  I think it's fine for ISP's to have their own dedicated pipes for their solutions (voip, video, etc). However, they still need to meet their quality of service. If I'm streaming 20 Netflix streams at full 1080p, of course they're going to throttle me. However if I pay for 40mb/s down I should be able to watch even a 20mb/s Netflix stream no problem.

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