Poor Netflix Quality Due to Use of Cheap Transit Provider, Cicconi Says, as Netflix Pushes Free Interconnection

AT&T and Netflix traded blows Wednesday as top executives questioned who should bear the costs of interconnection between content providers and ISPs. Jim Cicconi, AT&T senior executive vice president-external and legislative affairs, said at an Aspen Institute net neutrality event that the reason Netflix was seeing poor quality lately was its choice of “the cheapest transit company out there.” Columbia Law professor Tim Wu, who coined the phrase “net neutrality,” cautioned that ISPs sit as “situational” monopolies that could let them extract “too much from the rest of the network."

The FCC net neutrality rulemaking touched on the potential for more transparency in interconnection agreements. Chairman Tom Wheeler has said interconnection and peering are a “different matter” better addressed separately (CD May 16 p1). For Netflix Vice President-Government Relations Chris Libertelli, the phrase “net neutrality” carries a certain “plasticity” that encompasses everything from free speech interests to innovation at the application layer. The interconnection relationship “has become the new choke point” for ISPs to “tax Internet companies,” Libertelli said. Netflix doesn’t want the FCC to do “a lot of really good work in the last mile,” but by ignoring interconnection, “create another place for ISPs to discriminate,” he said. For a “durable” and “comprehensive” net neutrality, look at the interconnection and peering relationships including the interplay with content deliver networks and transit providers.

Net neutrality has always focused on the last mile, said Cicconi. The Internet has always had inequality built in, as companies have exchanged money to exchange traffic, he said. Perhaps Netflix’s poor connection problems are a result of its use of transit provider Cogent, “widely known as the cheapest transit company out there,” Cicconi said. When Netflix reached an agreement to build its own direct connection to Comcast (CD Feb 25 p1) , that was a decision “clearly” in Netflix’s “own economic interest” to “save money” while getting a guarantee of quality, Cicconi said.

Cogent responded to Cicconi’s comments after the event. “We give Netflix the highest quality at the lowest price,” Cogent CEO Dave Schaeffer told us. “I agree we're the least expensive -- cheapest if you like that term -- but that’s because we're more efficient.” But that doesn’t mean the quality is lower, he said: “Our quality is equal or better than that of AT&T or any other backbone.” Because ISPs have chosen not to upgrade, and the connection between the two networks is “saturated,” the service is bad, he said.

All the routes to deliver traffic cost money, but Netflix is the only company arguing it should be free, Cicconi said. Why is it right to pay Cogent, but when you have a direct connection, “now all of a sudden it has to be free?” he asked: Why should the FCC impose rules changing the “fundamental nature” of the Internet? Cicconi said he wasn’t surprised that Netflix was asking for free interconnection: “It doesn’t surprise me any” that somewhat would say “'You go for it, Chris! If you can get free, good for you.'”

Netflix paid to collocate with Comcast because the degradation in its video quality was “intolerable,” Libertelli said. All Netflix wants is for ISPs to open up a port on the back of a router, he said. The additional cost of adding capacity “is almost unmeterable” -- sending a bill for it “would cost you more to generate the bill” than it would to charge for the capacity, he said: Zero-cost interconnection is the right answer.

There’s a difference between paying for transit on networks in the middle part of the Internet, versus when interconnection “concerns a termination point,” Wu said, as Libertelli nodded vigorously in agreement. When the only way to reach a customer is through the ISP, it’s long been understood it has a terminating monopoly, Wu said: In theory, a company like Comcast “could charge whatever they want.”

One of the reasons for the success of the Internet is that people don’t have to pay for “each tiny little thing,” Wu said. “Most of it just happens.” The Internet avoids price disputes by setting the price of entry at “zero,” he said. Wu said his personal website is “rotten” but he’s in effect a content provider. “Luckily I have never had to negotiate with anyone about what kind of price I have to pay to get it on,” he said. “Compare that to the cable network if I had wanted to start a cable channel.” Wu warned against the “cablelization” of the Internet.

Wu’s website places a lot less stress on networks than Netflix does, countered Anna-Maria Kovacs, senior policy scholar at the Georgetown University Center for Business and Public Policy. “Then it’s not free, there is an exchange of payment for carrying that traffic,” she said. That has been the case through the history of the Internet.

The volume of traffic from Netflix is significant and puts major stresses on a network, Cicconi said. Comcast has to make “massive investments” to ensure Netflix’s programming “continues to be HD quality all the way through to the customer,” he said. “Obviously, that’s a service they're providing to Netflix customers and for Netflix.” Historically, video providers have had to pay for interconnection through commercial arrangements, he said, saying the cost to the ISP is usually much higher than what it charges the content provider. “They're partners,” he said. “This is the way the Internet works today, especially with regard to video.”

Cicconi said the transparency requirements of the net neutrality order did survive judicial review when the U.S. Court of Appeals for the D.C. Circuit threw out much of the 2010 net neutrality order in its decision in Verizon v. FCC (CD Jan 15 p1). ISPs like AT&T continue to post transparency information on their websites consistent with the 2010 rules, he said. “We don’t intend to change it,” he said. “We know that binds us to the old pre-Verizon case standard.”

AT&T opposes fast lanes and slow lanes for connection to the Internet -- the company can’t even figure out how that business model would work, Cicconi said. “We think the better investment for us to make is in these increases of capacity to everybody,” he said. The only way the FCC could chill investments by companies like AT&T in their networks is if imposes Title II or similar regulation on ISPs, he said. “It could bring about the very dangers that people are most worried about, which is the development of fast lanes, slow lanes.”,