The ISP Column
A column on things Internet
September 2022
Geoff Huston
Sender Pays
In September 2012 ETNO, the European Telecommunications Networks
Operators' Association, or most notably Deutsche Telekom and France
Telecom and fellow legacy telcos in Europe published a contribution to the
2012 World Conference in International Telecommunications (WCIT-12) with a
proposal for regulatory reform that in ETNO's words would compel content
providers to directly contribute to the costs on Internet communications
infrastructure. Or, in their words, "advocating for an adequate return on
investment based, where appropriate, on the principle of sending party
network pays"
(https://etno.eu/datas/itu-matters/etno-ip-interconnection.pdf).
The proposal excited some reaction at the time, with varying levels of
hyperbole. There was the Centre for Democracy and Technology's dire
warning that the "ETNO proposal threatens to impair access to [an] open
global Internet"
(https://www.cdt.org/wp-content/uploads/pdfs/CDT_Analysis_ETNO_Proposal.
pdf) which was pretty representative of the reaction from much of the
Internet sector.
At the time there were no changes arising out of WCIT-12, and the matter
would've remained as a simmering undercurrent in the industry, were it not
for Korea.
Korean Content Wars
Back in 2012 so-called "smart TVs" were the new thing, and Samsung
launched a high-definition video streaming service in South Korea. The
response from Korea Telecom (KT) was a rapid escalation, by blocking
these units from accessing KT's broadband access network. Considering
that KT was the country's major broadband access provider and Samsung
was (and still is) a major retail brand this was always going to
excite a public reaction. Samsung's response was to invoke the
principles of Network Neutrality, whereby, they claimed, consumers
should be able to use network services without any active
discrimination by the network provider, and also casting doubt on the
argument that the streaming service was an excessive consumer of
network capacity in any case. The Korea Communications Commission
stepped in and called KT's actions "inappropriate". KT backed off and
removed the network blocks on these televisions and the inexorable
rise of high-definition content streams continued in Korea, and all
over the Internet, in the ensuring decade.
But the issue never went away, and it had a reprise in 2021 when SK
Broadband (SKB) launched a legal action, claiming that Netflix should
pay the costs of supporting increased traffic loads in response to a
surge of SKB's customers streaming Netflix content. The Seoul Central
Count ruled that SKB has legitimate grounds for compensation and the
amount is a matter of negotiation between SKB and Netflix. Some
Korean lawmakers have spoken out against content providers who do not
pay for network usage despite generating large traffic volumes.
Clouding the issue in Korea was the additional factor that some local
content providers were already paying Korean ISPs for content stream
access, so this dispute was easily cast as a battle between local
enterprises and an overbearing US giant refusing to do what the local
players are already doing.
So, the entire set of issues of network neutrality, interconnection and
settlements, termination monopolies, cost allocation and infrastructure
investment economics are back with us again. This time it's not under the
banner of "Network Neutrality," but under a more directly confronting
title of "Sender Pays". The principle is much the same: network providers
want to charge both their customers and the content providers to carry
content to users.
Sender Pays
Let's pause for a second to look at the legacy of "Sender Pays" in the
context of this debate.
When a service is constructed using diverse components, then the way in
which service revenues are distributed to the various suppliers of the
components of the service can follow a number of quite distinct models.
There is the incremental payment model where the customer directly pays
each service provider for their service independently of the other
services. (Of course, imagine the privileged position of the final
provider the customer has already invested heavily in the provision of the
service and the final provider is in a position to charge a far higher
price as the transaction has already accumulated a sunk cost. Then there
are various forms of revenue redistribution models where the revenue per
transaction is distributed by the service orchestrator to the various
suppliers according to their inputs to support each transaction. The
service orchestrator can bill the initiator of the service transaction or
bill the service host. And there are various "bill and keep" models where
a set of service providers use each other's services by essentially
donating their service to each other. This allows each service provider to
bill their customers for the entire service and rely on a "knock for
knock" model where the foregone revenue for the donated services matches
the opportunity revenue gained in the efficiencies not having to
redistribute the fees paid by the customer for the compound service.
If we start with the mail service, the initial models were based on
"receiver pays" where the message accumulates a debt on its progress
towards delivery, and the debt is paid upon delivery of the letter. The
revenue could be redistributed to the other couriers following payment,
but a simpler scheme is for each successive courier to purchase the letter
from the previous courier. In this way there is a strong incentive to
complete the delivery as the terminating courier may have already funded
the letter's progress through the courier system.
The Royal Mail took two revolutionary steps in the nineteenth century that
would make it the leader in postal innovation at the time. In 1840, Roland
Hill, an enthusiastic campaigner for postal reform, led the Royal Mail's
introduction of the Penny Post, a cheap single rate for domestic delivery
of letters, replacing a complex distance and letter volume tariff. This
step made the mail service accessible to a much larger population. At the
same time, it was intended to result in a large-scale uptake of the use of
private correspondence, allowing the mail delivery service to realise
economics of scale and process. The second revolutionary step was a switch
from the recipient pays to a sender pays tariff model. This step removed a
troubling imposition on the mail service, caused by mail refusal. Under
the recipient-funded service model, the refusal of a mail item meant that
the postal service incurred the cost of delivery, as well as the cost of
return, assuming that the refused mail was ever returned. These reforms
had a profound impact. They generated huge volumes of postal traffic,
facilitated the development of commerce and underpinned significant
changes in social communication. This measure coincided with the
Industrial Revolution, when people were moving from rural areas to the
industrial cities and from one country to another, so these postal reforms
eased to, some extent, the social pressures that arose from this
large-scale transformation in nineteenth century society.
The telephone system followed this postal template. A telephone subscriber
paid the full cost of a telephone call to the local telephone company. If
the call involved another telephone operator to complete the call, then
the calling operator paid the terminating provider an agreed rate for
their part of the service. The inference from this model is that there is
a transactional accounting model for the service, where the user is
charged for each transaction, and it is this revenue that is used within
the inter-provider settlement regime.
At one point in the telephone saga one large telco acknowledged that it
cost the company some 21c to bill their customers 25c per local phone
call. The shift to flat fees without usage tariffs is not only attractive
to many customers, but also attractive to many operators as a means of
stripping out huge costs from their billing systems as well as eliminating
one of the major points of friction with their long-suffering customer
base.
This also leads to the observation that a stable inter-provider settlement
regime should be based on a uniform service tariff. How a service is
billed to a user should determine how the service revenue is distributed
between the various service providers who contributed to deliver the
service. When they differ then there is an obvious opportunity for
arbitrage and distortion.
While the sender pays inter-provider settlement regime was used for many
decades, that does not mean that it was free from various forms of abuse.
A national provider could raise offshore revenue by raising the local
international call tariffs for outbound calls, making it attractive for
international callers to call into the provider's network. This way the
provider could use the inter-provider payments associated with call
termination of these calls to raise revenue.
This opportunity was not lost on many national telcos and the resultant
arbitrage of international call accounting settlement rates was often one
that works to the financial disadvantage of AT&T in the US. It was no
coincidence that when the Internet emerged AT&T lobbied US politicians and
the administration to keep the Internet out of the clutches of the ITU-T.
AT&T clearly believed that the root of this problem lay in the regulatory
framework that was promoted by the ITU-T. They believed that the
one-country-one vote system biased the entire process in favour of smaller
nation states and the outcomes were rarely ones that coincided with AT&T's
interests. If the Internet was to be constructed on a platform of built
through private sector investment, then the international governance
structures should reflect the same primacy of private sector interests.
From the perspective of a telephone operator everyone is a customer.
Enter the Internet
The Internet was originally conceived as a model that was, at least in
terms of functionality, akin to the telephone network, but their
differences are far more important that their similarities.
There is no "call" in the Internet. There is no confirmed transaction that
initiates a network state that has attributes of distance and duration.
Packets are far more casual than that. Packets may be delivered to their
intended destination, or not. They may have been solicited, or not. They
may be intercepted by intermediaries or agents, or not. They may trigger
other packets, or not. So, in the absence of a clearly defined transaction
model of interaction between the Internet and its connected hosts, then a
transactional accounting method to recover costs through transactions was
never going to work. So, how was the Internet supposed to funded?
Contrary to the utopian mantra of the late 80's the Internet is certainly
not free, and ultimately there is only one source of revenue: its users
like you and me. We each pay our local access providers some form of
service tariff, typically in the form of a "whole of network" access
tariff. We do not expect to be charged more if the packets are to be
delivered to a destination on the other side of the world as compared to
next door. We don't expect to the charged incrementally to receive
packets, nor to send packets. The tariffs are based on an "access" model,
where the service provider is providing a comprehensive access model. The
retail differentiator is typically the access bandwidth, and in certain
markets, notably mobile services, some count of aggregate traffic volume.
In the absence of a transactional model as a common retail structure then
how do various providers financially balance their respective
contributions to providing a seamless end-to-end experience to end users?
The model used by the Internet is extremely crude, but quite effective.
When two networks directly interconnect and exchange traffic then either
one network is a customer of the other and pays for all traffic sent and
received, or the two networks regard each other as "peers" in the true
sense of the word, and exchange traffic without any payment between them.
From an individual network's perspective, the network pays for a "transit"
service provided by its contracted upstream providers, it receives revenue
from its customer networks, and it "peers" with other networks where it
exchanges access to its customer base with the peer network's customer
base without payment, but does not provide access to its transit
providers, nor to any other peer networks. (Figure 1).
<https://www.potaroo.net/ispcol/2022-09/senderpays-fig1.png>
Figure 1 – Inter-provider settlements
Who determines who is the customer and who is the provider? Who determines
which networks are peers of a given network? The Internet's answer is
"nobody". The determination of roles is left to the networks themselves
and the peering and interconnection regime functions as a market.
The result is that all viable paths between endpoints on the Internet have
just two parts: a part where the packet's sender is funding the packet's
transit, either directly or indirectly via customer/provider
inter-provider relationships, and a second part where the packet's
receiver assumes funding responsibility for the packet's transit (Figure
2)
<https://www.potaroo.net/ispcol/2022-09/senderpays-fig2.png>
Figure 2 – Inter-provider path settlements
This Internet path property is sometimes referred to as "valley-free"
paths. If a customer/provider relationship is an "upward" relationship, a
provider/customer relationship is a "downward" relationship and a peer
relationship is a "horizontal" relationship, then any viable path starts
with a sequence of customer/provider hops (up), then at most one peer hop
(across) then a sequence of provider/customer hops (down). All financially
viable inter-provider paths can be presented as a "mountain" in this
taxonomy. A "valley" would be where a packet is received by a network as a
customer but then passed to a different transit network also as a customer
(Figure 3). The valley segment is unfunded either by the sender nor the
receiver.
<https://www.potaroo.net/ispcol/2022-09/senderpays-fig3.png>
Figure 3 – Inter-provider "valley" path
So, we now have a lexicon of customer/provider and peer, and an associated
understanding of the flow of money across these two relationships. What
about paid peering? This is a variant of a peer relationship where the
paid peer receives the same access as a conventional peer but pays the
provider for this access. It can be seen as a subset of a conventional
customer relationship without access to the providers transit providers
nor to any other peer, presumably at some discount to the normal customer
tariff, so in many ways paid peering is just another instance of a
customer/provider relationship, but without the stigma of being labelled
as a customer!
Service Provision
The internet interconnection model assumes that the interior of each of
these networks are a collection of carriage circuits and packet switches.
However, an ISP performs a number of other functions which can be through
of as part of the ISP's service, and these services are bundled into the
retail product.
A good example of this implicit bundling can be found in the provision of
Domain Name System (DNS) name resolver servers. These services are
provided by the ISP and made available to the ISP's customers. They are
typically not made available to the ISP's transit providers, nor to the
ISP's peers. The cost of operating such services is met by the ISP's
customer base through the ISP's tariff structure.
Such ISP-provided services are not limited to DNS services. Prior to the
ubiquity of Google's Gmail service many ISPs offered mail hosting, and
perhaps web hosting and related services. In some cases, these were
bundled into the retail tariff, and in other cases were optionally
selected services available at an additional tariff.
The next step in the evolution of the provider service model is the
third-party provision of such bundled services. An ISP may pay a third
party to provide DNS services, for example. Conventionally, this is seen
as a service provided to the ISP, at a cost to the ISP, which is bundled
into the ISP's retail offering.
However, the distinction between a third party acting as an agent of the
ISP and a third party acting independently start to get blurred when the
service model concerns third party content hosting and similar. Having
content delivered directly to the ISP's customer base allows for a cheaper
and faster service for both the ISP's customers and the content provider's
content customers. The question naturally arises that if hosting a
third-party content service within the ISP's infrastructure saves costs
for the content provider, then rather than the ISP paying for the service
and folding that into the ISP's bundled tariff, shouldn't the content
provider be paying the ISP for access services in the same vein as any
other customer? What makes the content service a special case here that it
gains free access to the ISP's network? Why should a content provider be
freeloaded over the ISP network when all others pay for similar access?
There is no objective and clear answer to this question. Instead, the
answer is the outcome of a negotiation between the parties and the
outcomes vary based on the relative pressure and leverage each party can
bring to the negotiation.
Choke Points and Natural Monopolies
A "natural monopoly" is a type of monopoly that arises where the unique
position of the incumbent is such that there are significant barriers to
entry for any potential competitor. A sea port might be located in a
particularly favourable point that makes it uniquely useful for trade,
such as the location of Rotterdam at the mouth of the Rhine, or Copenhagen
at the point where the Baltic Sea meets the North Sea.
There are various choke points in the Internet infrastructure which become
natural monopolies. Exclusive use radio spectrum allocations for mobile
service providers are a good case in point where the usable spectrum is a
limited resource, and the spectrum auction process typically has just 3 or
4 operators each with exclusively licensed spectrum while other intending
mobile operators have to negotiate arrangements to share the mobile
infrastructure. The broadband access networks also can be considered as a
natural monopoly given the high cost of competitive deployment of multiple
access networks. Even a single broadband deployment seeks a household
connection rate of more than 60% of households passed to make the
deployment cost efficient. Multiple parallel deployments of broadband
access infrastructure become extremely prohibitively inefficient very
quickly.
How does this relate to the concept of "sender pays" in relation to the
negotiations between access providers and content networks? To rephrase
this in the terminology of Internet interconnections some access ISPs
would like to position the content streamers as a "paid peer" and have
them pay some termination fee to have their content reach the ISP's
customers. The content streamers are asserting that they have carried
content across oceans and across continents and have delivered the content
to the front door of the ISP, all at their expense, and it seems like a
crude from of extortion for the ISP to then charge the content stream to
carry the content up to the third floor!
It is a point of leverage for the access provider. For example, in Germany
the three largest access providers serve some two thirds of the national
user base, and there is no feasible way for an alternative mechanism to
access these users, and no real prospect of churning these customers to a
different provider. So, if the position from these three providers is one
that demands some form of access co-payment from the content provider as a
termination fee, then the content provider is likely to accede to these
demands and pay the impost. To put is simply, there is no getting around a
termination monopoly.
Negotiation or Blackmail?
What if the content provider cannot reach an acceptable arrangement to
directly host content servers within the access provider's network?
This is not an abstract question. If the access ISP takes the position
that these third-party content providers should be customers of the ISP,
then the content provider has little choice but to either enter into a
customer arrangement or take a step back and offer the service via an
external peer or transit network. The content streamer then is not paying
the access ISP a termination fee and the ISP's customers can still access
the steamed content. Problem solved. Right?
But that's by no means the end of the story. Part of the negotiation
playbook as seen the access ISP deliberately allow this external peer or
transit connection to reach the content provider to congest such that the
service quality of the streamed content degrades significantly. This has
happened in many contexts over the years, such as in the early 2000's when
one large economy decided to force transit ISPs to pay a termination fee
to access their national internet infrastructure. The forcing function was
to only allow access only via under-provisioned access path unless the
transit ISP was willing to pay the termination fee. The same technique is
used today when a large access ISP deliberately pushes off-network content
services to enter the ISP's network via an under-provisioned path which
significantly degrades the customer experience when accessing the service.
This deliberate differentiated treatment of traffic from certain content
sources in order to exert leverage over them falls under the general topic
space of "Network Neutrality." In theory the customer base has contracted
the Access ISP to deliver all content to the customer on equal terms.
Under network neutrality framework the network should not treat traffic
from different sources in different ways. This has been a high-profile
issue in the United States, where the issue of enforceable measures to
require public Internet networks to carry all traffic in a consistent and
neutral manner hinges on whether an Internet service is defined as an
"Information Service" as defined by Title I of the US Telecommunications
ACT or as a common carrier under Title II of the same act. If ISPs are
Title II common carriers, then the FCC has the power to enforce measures
on these providers including behaviours consistent with the principles of
network neutrality. The 5-member Commission of the FCC changes with each
new Presidential administration, and the attitude of the FCC has reflected
the seesaw of US political leanings in recent years.
Under FCC chair Tom Wheeler, the FCC voted in the 2015 Open Internet
Order, categorizing ISPs as Title II common carriers, and making them
subject to net neutrality principles. Under the Trump administration the
FCC chair Ajit Pai, had the FCC reverse the 2015 Open Internet Order in
December 2017, reverting ISPs to Title I information services. As part of
an executive order issued in July 2021, President Biden has called for the
FCC under the current chair, Jessica Rosenworcel, to undo some of the
Trump-era changes around this Title I classification.
Negotiation Tactics vs Reality
The conventional rationale from the access provider is that the demanded
termination fees would allow the provider to cover the costs of
incremental upgrades to the internal infrastructure of the access network.
Is this really the case? Or is this a case of opportunistic rent seeking
on the part of the access provider?
A typical access ISP infrastructure is shown in Figure 4. The internal
design of these networks is a collection of edge fan-outs, where each edge
concentrator is connected inward to a Point of Presence (POP), which are
themselves interconnected over a backbone set of trunk connections.
Typically external connections to exchange points, transit upstream
providers and peer networks are also made from backbone sites, so the edge
network is dedicated for customer connections.
<https://www.potaroo.net/ispcol/2022-09/senderpays-fig4.png>
Figure 4 – Generic Access ISP design
Over the past decade streaming has taken over much of the traffic profile
for a retail ISP. All CDNs offer settlement free peering and provide
private interconnects over IXs irrespective of the size of the ISP (Figure
5a). Larger ISPs may be offered central cache servers or server clusters
without cost to the ISP (Figure 5b). Large ISP may use CDN cache clusters,
or use caches deployed closer to the edge of the internal infrastructure
(Figure 5c). In this edge deployment scenario, it's unclear as to the real
extent of the impact of this streaming content in the ISP's internal
infrastructure, as the content streams are passed on demand only across
the access tails rather than across the entire ISP's internal
infrastructure.
<https://www.potaroo.net/ispcol/2022-09/senderpays-fig5a.png>
Figure 5a – External Content Streaming
<https://www.potaroo.net/ispcol/2022-09/senderpays-fig5b.png>
Figure 5b – Internal Content Streaming
<https://www.potaroo.net/ispcol/2022-09/senderpays-fig5c.png>
Figure 5c – Edge Content Streaming
What is also unclear is the extent to which existing customer payments
have 'covered' the ISP's costs. Given that the major case to deploy a
high-speed broadband network is to stream content, then it does seem to be
either negligent of the access ISP sector if they failed to factor in this
use pattern while at the same time deploying ever faster 5G mobile
services and high-speed fibre broadband infrastructure. Or, more likely,
this use case scenario was already factored into the access product from
the outset and the claims that the streaming use by customers have created
an unanticipated load on their network infrastructure to be specious at
best, or, more likely, an outright lie.
The critical factor for residential broadband deployment is not the costs
to pass a house (in USD that cost still appears to be some $1,000 per
household as part of a larger deployment), but the take up rate of the
service. The cost of the tie line to the house is some $800. If the take
up rate is 50% then cost of the project rises by 55% as compared to a 100%
take up rate. The costs associated with the take up rate of broadband
dominate the economics of broadband deployment, and the marginal cost of
bandwidth and volume are relatively minor cost factors. Accordingly, it's
challenging to substantiate the claims of significant costs on the part of
the Access ISP to meeting the traffic demands of carrying streaming
services.
Consequences
The issue here is that in a relatively unconstrained negotiation the
outcomes tend to favour the larger player. If the content provider is a
major player with content that customers are demanding, then the ISP is
under some pressure to reach an acceptable outcome or risk customer churn
to a rival access provider. On the other hand, a major access provider is
able to present an effective termination monopoly to the content provider
and can demand a termination fee from the content provider as there are
few alternatives to the content provider other than withdrawing from that
market completely while the content streaming business is subject to a
wave of competitive pressure from the various new entrants.
What improves the negotiating position for both parties is relative size.
The greater the customer share the greater the leverage the access ISP can
bring to the negotiation. The same applies to the content provider, and
the larger the content provider in terms of market share the better its
ability to capture a significant committed customer base, and then use
this committed customer base as leverage in the negotiation with the
access ISP.
The common outcome for both parties is increased pressure to aggregate and
increase their size, or, in other words, continue along the inexorable
path to centralization and large-scale industry consolidation, which is
already a prominent issue for today's digital world.
Options for the Regulator
How should a regulator respond to this situation?
It's clear that a detailed regulatory response that sets forth strict
guidelines on how termination fees can be levied, and under what
circumstances, stands a strong risk being overtaken by events in
relatively short order. Overly prescriptive directions have the risk of
rapid obsolescence as the players, the services, and the technology
options change.
The larger danger lies in potentially compromising the ability of the
national economy to sustain continued private sector investment in
broadband infrastructure through increased regulatory risk. There are very
few economies where the construction of a broadband access infrastructure
has been undertaken as a public sector activity, and if it's a private
sector activity then each national environment is competing for investment
funds with other national environments as well as other activity sectors.
The capital returns on infrastructure investment in this sector have been
generally rather poor, and this is reflected in the protracted exercises
that make up various national broadband rollout programs.
However, sustaining a favourable environment for private sector investment
in infrastructure is not the only objective here. An overly predatory
private sector that exploits a monopoly position to the detriment of
local; consumers and local enterprises is equally a major liability for
any economy. In this post-industrial social landscape, many economies are
pinning their hopes for a sustainable future on a vibrant and healthy
digital economy. A fundamental fracture in the relationship between
content and carriage services imperils any such aspirations for a healthy
and efficient digital economy at a national level.
The currently fashionable regulatory position is seen in the response in
Korea: "the parties must negotiate in good faith. We will not dictate the
outcomes of such negotiations, but we will insist that it is undertaken in
a genuine spirit of reaching some mutually tenable common position as an
outcome." But what is a "good faith" negotiation if one of the parties
maintains that the outcome is unfair? If such negotiations take the form
of a set of bilateral negotiations, then presumably a large access ISP
with a significant customer population can leverage a more advantageous
outcome than a smaller ISP. Does this provide yet more barriers to entry
for smaller ISPs with the consequent erosion of a diverse competitive
access ISP environment. Do similar considerations apply in the content
service space? Are larger content providers able to force outcomes that
are more advantageous to them, as compared to smaller content providers?
Again, does this provide unwelcome incentives for more aggregation in the
content service sector?
In any case, the pressure for some further response appears to be very
high in Europe. In a recent media report
(https://totaltele.com/european-commission-to-ask-telcos-for-proof-that-us
-tech-giants-should-pay-for-traffic/) it was noted that there is some
enthusiasm for the European Commission to move ahead with such a structure
of negotiated termination fees, while other commentators are concerned
that there are some serious longer term concerns with the erosion of
network neutrality and the potential for network capture as a consequence.
Be careful what you wish for
What happens when the content platforms consolidate further such that the
few enterprises remaining in the field are truly massive, far larger then
even today?
What happens when these content behemoths have sufficient capital
resources to play a dominant role in the access provider by virtue of
being their largest and most significant customer through such termination
fees? For any enterprise if a small subset of customers dominates the
revenue profile for the enterprise, then the enterprise will naturally
focus on the needs of these customers at the expense of all others.
Ultimately, such a skewed situation could reach the point where the
dominant customers effectively take over the enterprise.
This is not idle speculation in this industry. The last decade has seen a
comprehensive change in the submarine cable landscape and these days the
majority of new cable projects and most of the portfolio of
intercontinental cable connectivity is undertaken only by the very largest
of today's content providers. More than 80% of the current trans-Atlantic
cable capacity is controlled by content providers, not by the traditional
carriage industry. So dominant is the content sector's position in this
domain that their control of the submarine cable sector is in itself a de
facto monopoly. No single carriage entity can amass the volume of content
to justify the construction of new terabit cable project, nor have carrier
consortia been up to the task, and few, if any, of the carriage providers
have access to investment funds to pay for such a project. The outcome has
been that content industry is no longer a customer in this sector. It is
also its own provider for this form of carriage.
What then of the last mile access market? Can it sustain itself as an
independent sector? Are there sufficient uses and sufficient competitive
interest in the access market to withstand the pressure that could be
placed upon it from a largely aggregated and highly lucrative content
sector? For example, Google has been an interested low-level player in the
US access markets for many years. Google's Fi service and Google Fibre
appears to be deliberately positioned as low level "foot-in-the-water"
exercises that are exploring the space. What might happen if their level
of interest in the access sector were to dramatically increase? Consumers
would probably be all in favour of such a move, particularly if it
involved a dramatic increase in service quality, reliability, and a
massive drop in cost to the consumer. What would be the regulatory
justification to resist such a move, assuming that it was confidently
expected that it would result in a vastly cheaper and more capable digital
infrastructure? We have already seen the shift to content-based
aggregation for much of or digital service environment, from mail and
messaging to document management and commerce, based on offerings that
have slashed prices to consumers and increased to robustness and quality
of the offered service. The regulatory response to such fundamental
changes in this landscape has been a general silence. If the current
efforts to force the content sector to engage with the access network
operators are indeed successful, and so successful that the content sector
takes a substantial position in not just subsidising but directing
broadband access infrastructure activities, then what would be left in the
access sector? Would they still remain as a separate sector? Or would the
broadband access sector become part of an even larger entrenched monopoly
of the current suite of content providers?
With particular reference to the European Community, there is already a
visible level of concern with the level of offshore control of the
regional DNS infrastructure, as evidenced by the DNS4EU program. It
appears to me that the concerns over foreign control of critical
infrastructure applies as a far greater strategic concern if the subject
of the foreign control was the entire national broadband access
infrastructure. In that context, inviting these offshore entities to
undertake what could become a major investment in this strategically
important local asset strikes me as a triumph of short-term opportunism by
a small clique of actors at the expense of a broader common strategic
interest for the European region, and others of course.
There is also the concern as to whether this could ever be undone if we
later regret it. The last time we saw large scale social upheaval was as
an outcome of the industrial age at the end of the nineteenth century.
Once the industrial behemoths of the day had consumed their competition
and become de facto monopolies, they turned their attention from the
present to the future and worked diligently to create a dominant position
that would echo through the ensuing decades. General Electric,
Westinghouse, JP Morgan, Standard Oil are still with us from this period.
I have no doubt the current digital behemoths have similar aspirations of
an enduring legacy, and once they convert such termination payments into
structural subsidisation of access networks, then they can thereby exert
greater levels of controlling interest in this critical infrastructure
component.
The old adage applies here of being very careful of what you wish for! We
really may not have the tools or even the understanding of how to cope
with the outcomes were this comprehensive hegemony of content over
carriage to eventuate.
 
Disclaimer
The above views do not necessarily represent the views or positions of the
Asia Pacific Network Information Centre.
Author
Geoff Huston AM, B.Sc., M.Sc., is the Chief Scientist at APNIC, the
Regional Internet Registry serving the Asia Pacific region.
www.potaroo.net