Level 3, Verizon Throw Blame at Each Other in Netflix Debacle

A quarrel ensnaring Netflix, ISPs and the “transit providers” that interconnect with them underscore the complexities in the debate over Net neutrality that is pending before the FCC.

A fundamental question continues to divide some of the most prominent U.S. communications companies: When a subscriber of the nation’s biggest streaming video service has difficulty watching a movie or television show, who is to blame for the connectivity conundrum? An ISP such as Verizon? The transit provider (Level 3, for instance) that interconnects with an ISP? Or Netflix, whose massive U.S. subscriber base now exceeds 36 million?

Depending on the source, the answer differs drastically. The communications industry, at least, agrees on a finer point: that the connectivity problems trace back to where networks between an ISP and transit provider meet.

In a blog written in March, Netflix CEO Reed Hastings observed that a lack of adequate connectivity inhibited Netflix’s performance, “subjecting consumers who pay a lot of money for high-speed Internet to high buffering rates, long wait times and poor video quality.”

More recently on the blogosphere, Level 3 and Verizon have engaged in a war of words over whom is responsible for such degradation in service.

Verizon claimed Level 3 could pay for connections to its network but has chosen to rely on free peering arrangements. According to Verizon, Level 3 is sending far more traffic to Verizon than Verizon is sending to Level 3, creating an imbalance that is not contemplated under the peering agreement.

Rather than purchase needed capacity, Level 3 is insisting Verizon “add capacity to the existing peering link for additional downstream traffic even though the traffic is already wildly out of balance,” wrote David Young, vice president of Verizon federal regulatory affairs, in a blog.

Level 3 has countered that the telecommunications companies could solve the congestion through an easy fix: by connecting more ports on routers.

“Simple. Something we’ve been asking Verizon to do for many, many months, and something other providers regularly do in similar circumstances. But Verizon has refused,” wrote Mark Taylor, Level 3’s VP of content and media. “So Verizon, not Level 3 or Netflix, causes the congestion.”

Level 3 said it’s even willing to buy the port cards, which it says cost a few grand for each 10Gbps card that can support 5,000 or more streams.

Ed McFadden, a Verizon spokesman, offered yet another rebuttal to Level 3. 

“The point is they negotiated this port as a settlement-free port,” he said in a phone interview. “It was designed as settlement-free peering … They are trying to pull a fast one and get something for nothing without negotiating terms.”

What’s more, Verizon argued, Level 3 is a hypocrite. In a dispute years ago, Level 3 said Cogent Communications was sending more traffic to it than Level 3 was sending to Cogent. The imbalance in the traffic exchange caused Level 3 to terminate its peering agreement with Cogent and seek to enter into a commercial agreement with Cogent to deliver the traffic, Verizon pointed out.

S. Derek Turner, research director with the nonpartisan organization Free Press, sided with Level 3 in its current dispute with Verizon.

“Verizon thinks that Level 3 should pay Verizon for the ability to deliver the traffic that Verizon’s customer [requested] in the first place,” Turner said, referencing Netflix subscribers who use Verizon as their ISP. “That is absurd.”

The real culprit, argued Frost & Sullivan analyst Dan Rayburn, is Netflix itself.

Other major content providers on the Internet, such as Google, Microsoft and Yahoo, have long had direct interconnection agreements with ISPs such as Comcast and Verizon, he said.

“Google and Microsoft have direct interconnection agreements. Why is there no other company besides Netflix complaining about this?” Rayburn asked. “Where is Google? Where is Apple? Where is Microsoft? … these are all guys that pay ISPs for access to their network.”

And Netflix has actually joined the interconnection party, albeit perhaps reluctantly. As has been widely reported, Netflix has entered into a direct interconnection agreement with Verizon. The pact will cut out Level 3 as the transit provider of Netflix traffic to Verizon’s network.

In an interview this week with The Wall Street Journal, Netflix CEO Reed Hastings said he met with Verizon CEO Lowell McAdam at a media conference and they agreed to have both companies “work harder to have Netflix faster on Verizon.” Hastings said he anticipated “rapid improvement over the coming months.”

And earlier this year, Netflix reached a direct interconnection agreement with the nation’s largest cable company, Comcast, whose agreement to purchase Time Warner Cable is pending before the FCC.

In a blog written in April, a Netflix executive alleged the pact was inked after “Comcast allowed its links to Internet transit providers like Level3, XO, Cogent and Tata to clog up, slowing delivery of movies and TV shows to Netflix users.”

Such allegations have fueled the Net neutrality debate over protections U.S. regulators should adopt to protect consumers’ access to Internet content such as Netflix.

During a second-quarter earnings interview on Monday with representatives from JP Morgan and MoffettNathanson, Hastings described the conflicts that have occurred between cable networks and distributors, which have led to blackouts on television stations. He seemed to leave open the possibility that a disagreement between Internet providers and content companies could result in a blackout affecting an Internet service like Netflix.

“And we would hate to see ISPs brownout or blackout certain Internet sites while they tried to extract payments,” Hastings said. “That just ruins the consumer experiences idea, that when you sign up for the Internet you can get everywhere.”

Rayburn found Netflix’s argument disingenuous. He said there is no evidence ISPs have ever blacked out an Internet service such as Netflix.

“To say they are forced to pay Comcast or payments would have to be extracted from them is simply not accurate because they [Netflix] used to deliver content without many of those payments,” Rayburn said, pointing out that Netflix used to pay the likes of Level 3 and Akamai to deliver its content over their content delivery networks. 

Netflix now operates its own CDN Network called Open Connect.

“When you enter the market by building your own CDN networks, there are inherent costs associated with paying for that,” Rayburn said. “Some of those costs are paying for direct access to last-mile networks. In some cases, you might be able to exchange traffic for free. In other cases, you might have to pay. But all CDNs do that. All CDNs buy transit. All CDNs do some free peering.”

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