Netflix CDN v. The Cable Guys or “Comcast v. Level 3 Part Deux—Peering Payback!”

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Few things make me experience the bitter joy of Cassandrafreude more than watching someone flip the other guy’s argument. So it is with Netflix and Time Warner Cable, and their current beef over Netflix making its new uber-HD content available to ISPs for free, but only through Netflix’s content delivery network (CDN).  TWC accuses Netflix of demanding "unprecedented" access and privileges for its own (i.e., Netflix's, not TWC's) content. (Although ESPN360 actually went so far as to charge ISPs on a per subscriber basis some years back, which strikes me as a little more extreme than just saying "use my CDN," but lets not quibble on this point.)

This of course begs the question: how can Netflix be asking for privileges if they are making this available for free, and if it actually improves speed and avoids network congestion (you can see a Netflix power-point about the technology here)? Come to think of it, this has been available for free since May, but none of the major vertically-integrated MVPD/broadband access providers had any interest in it? (Although a number of stand alone players like Google Fiber signed up right away). Why did Netflix have to artificially create an incentive to get TWC (and the other major MVPD/access providers) to even come to the table to discuss connecting to their CDN? Could it be because you are actually making Netflix pay through the nose to deliver its content to you via traditional CDNs, so that “free” actually means “no longer able to collect CDN fees from our chief video rival?” Does it have anything to do with the fact that the CDN allows Netflix to determine – and publish – whether an MVPD/broadband access provider is diddling with its content delivery?

I know, I have a suspicious nature. I am sure there is some other perfectly logical explanation why you are resistant to getting a free CDN connection that improves your subscriber’s experience. But really, TWC and other MVPD/broadband access providers, after that little contretemps between Comcast and Level 3 (boring econ paper here), I expect you will forgive me for my suspicions. Remember that? How Level 3 became Netflix’s new transport ISP, and Level 3 wanted to connect to Comcast as a peer, but Comcast told them that because they were dumping all this content on their network and functioning like CDN, they needed to pay to connect like any other CDN or not get through at all. So Level 3 buckled and paid, then spent a bunch of time complaining at the FCC that this was a Net Neutrality violation while Comcast said it was a "peering dispute." And -- big shocker -- the FCC took zero action on Level 3's complaint, essentially telling Level 3 (and Netflix) 'You folks are on your own.'

Oddly, Netflix opted to do something other than knuckle under. Who'd a thunk. Then Netflix tried to give it to you all for free, and you said no. So Netflix gave you a little incentive, and here we are today.

So TWC, you shouldn’t be mad at Netflix. You should be mad at Comcast for forcing Level 3 to go through the “CDN” entrance to your network (where you get to charge them) rather than the “peering” entrance to your network (which is free).  It was fairly predictable after that (and after Comcast announcing that its Xfinity content would get special treatment when streamed to Comcast subscribers) that Netflix would do the Free Market thing and fight back. Payback is the bitch that peers!

Or, to put it in cable language, you can thank Comcast for bringing the retrans fights to streaming video.

Also amusing (in a Cassandrafreude kinda way), is Fred Campbell’s blog post about how Netflix is now threatening Internet freedom by doing exactly what Fred and other anti-NN types instructed the “freeloading” and “parasitic” “bandwidth hogging” content providers ought to do – build their own network.  Amusingly, Fred  is perversely right about his conclusion. This is the ‘doomsday scenario’ predicted by net neutrality advocates about how the content side and the provider side would get into an arms race and risk fragmenting the ‘net and stuff. You know, the one folks who opposed net neutrality told us (a) could never happen, and (b) if it did, that would be the free market at work. But whereas Fred concludes that the problem must be asymmetric regulation (in the form of that evil net neutrality!), I conclude the problem is our failure to adopt Title II. P-o-t-a-t-o/p-o-t-ah-to. Either way, we are on the slide to fragmentation that we Cassandra’s who actually study (rather than worship) free market economics predicted.

Oh, if only we had an agency that cared about the broader implications of all this! An agency willing to break apart the warring elephants and force everyone to play by a set of rules that protects consumers, promotes competition and innovation while still ensuring that the existing incumbents will reap massive (but not monopoly) profits! An agency with . . . . dare I say it . . . . Man Pants! But where could we find such an agency? (Well, maybe if they appoint Susan Crawford Chair. God knows it’s about time they appointed a woman.)

If anything turns up on that front, let me know. Meanwhile, TWC and other MVPD/access provider incumbents, and everyone else who fought any regulation of "the Internet," enjoy the free market Nirvana you have made. Sorry it didn’t turn out quite the way y’all expected.

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