http://www.nytimes.com/2003/03/17/business/betting-speed-pur...
Comcast made a big bet in 2003 that many other companies did not make. Demand for broadband has been strong, but it was far from a given at the time Comcast made the investment that it would result in strong returns well into 2017.
It's easy to look back with full knowledge of how things played out and determine that Comcast was unsophisticated in its financial and business planning.
Comcast has grown because it has provided a "neutral enough" internet for its customers. There is absolutely no reason to believe it would begin to act differently now. If anything, Comcast's strong profit margins increase the chances that other companies will enter into competition for the business.
I'd rather have Google invest money and brainpower into creating things like Webm than to pay lawyers and PR specialists to promote net neutrality.
The sorts of packet inspection techniques you describe can be thwarted by encryption, and are no different than what is being done within Google to monetize user behavior/preferences to the nth degree.
You argue that Comcast wants to charge content providers for preferred access. I'm sure they'd like to, but this is the case for financial, not technical reasons:
The following is the most important point: Once a service (like Youtube) becomes popular enough, the traffic pattern of packets going to that service begin to resemble the traffic pattern of the internet itself, making arbitrage impossible. So the economics that once worked for ISPs to arbitrage based on upstream vs downstream bandwidth no longer work because upstream circuits are largely priced based on broad data access patterns which are heavily influenced by major content providers.
So the profit margin on residential bandwidth starts to approach $0 as 100% of the content consumption matches the exact characteristics of the upstream provider's pricing model, since upstream providers also do arbitrage, but with much less aggressive hedges and less leverage.
Consider it this way, you can start a competitor to the post office that is cheaper for some small list of addresses. Maybe you could profitably deliver all first class mail for 25 cents within a single zip code. But if you try to offer a similar service to all zip codes, you will likely face nearly identical constraints to the post office and you will not be able to undercut prices.
For ISPs, the more predictable customer demand gets, the more likely the arbitrage has already been done upstream, and the closer the residential circuit becomes to a dedicated circuit.
These days, suppose 90% of internet users follow a sine wave data usage pattern day after day that is divided between Netflix, Youtube, and a handful of other hosts. Video is massively more bandwidth intensive than other stuff so video content providers dominate. This means a lot less profit from bandwidth price arbitrage, which is why ISPs are toying with the idea of charging content providers for access (it's also a bit silly because the moment youtube goes down people would call in saying their cable modem was broken).
I don't think it's a bad thing for Google to help pay for the ISP's upstream bandwidth costs, since whatever contracts the ISP buys are largely serving the purpose of piping content from Google to consumers. It may or may not be extortion for Comcast to try to do this, but that should be up to regulators to decide after the fact. If this happened, by the way, it would likely accelerate Google's slow-as-molasses last mile effort and result in much more competition for residential ISPs.
ISPs provide a very helpful non-google intermediary for the small bit of our internet behavior that is not being captured and stored by Google. I think it is better to have a variety of firms, each with its own core specialty, fighting over this market than for regulators to simply follow Google's advice and hamstring ISPs into lower profit margins.
In an ideal world all internet connections would be unconstrained by QoS considerations. But if you think back to dated last mile tech like T1 lines, the financial arrangement is leasing the piece of copper wire and paying for a 24/7 circuit that can saturate that copper's bandwidth in both directions. For this reason, a T1 cost 10x the price of a residential connection supporting the same average bandwidth. If you are running a data center, this contract is important, you can't afford to deal with congestion and reduced bandwidth that is beyond your control. But for residential customers it is a desirable and worthwhile tradeoff that does not benefit from regulation whatsoever.
I did not say that. My point was that Comcast kept pace with innovations in silicon and networking. Like AWS and GCP or Azure keep upgrading servers from Pentium to i7. They had to keep pace with technology advances and demands. Sometimes their investments were to lower costs, more customers supported by same dollar investment at upgrade time.
Comcast can try to increase profits as much as they like, the regulators and people are not interested in making google and facebook pay because they have more money.
Berkshire Hethaway doesn't own NASDAQ money because they are making a killing. There are plenty of startups that fail, Comcast is not subsidizing those startups. Plenty of startups that make it big, Comcast doesn't get to add their tax on that success.
That's one way of looking at it. Note that I do not think Comcast would successfully turn off youtube for any customers without creating a major uproar.
On the other hand, suppose I invent a game that mirrors the contents of every user's hard drive to every other user constantly, utilizing 99% of available upstream and downstream bandwidth. Suppose this game goes viral and becomes the next Youtube.
How should ISPs deal with it? Should they be required by law to allow it?
I think it's reasonable for ISPs to create a definition of residential bandwidth that prevents against unexpected bandwidth utilization trends. I want unfettered bandwidth, but I realize that there is additional cost associated with provisioning it.
They allow or disallow it? The question itself doesn't make sense. If the users want to use capacity they bought and Comcast sold, is the user's right. Comcast didn't foresee the demand is error of their actuaries. A insurance company pays up even if their actuaries make an error. Comcast doesn't get to externalize their costs, they could try, but we as customers have no obligation to honor it. I would claim that video demand has actually made the equation very simple for them with higher build out but lower risk of it not being utilized. The demand is very predictable and not "unexpected". And, monthly quotas (1TB per month) on top of bandwidth limits (150 Mbps) the risk is quite reduced. If someone with 250 Mbps ran at 99% capacity, 1TB quota would be over in less than 11 hours.
It's not as if Comcast sends you a check every time there is a network congestion and you don't get top speed that you are paying for. There is no consequence of congestion for Comcast but they are using it as a reason to get ransom from content owners. They are setting up the conversation such that they have less and less reason to remove congestion, more the congestion, more the end user suffer, more the case for google and netflix to open up their wallet.
$70 a month is same as cable bill and for cable Comcast has to pay channel operators. On internet, Comcast doesn't even have to pay to youtube or netflix. I mean internet service is pure profit compared to cable which runs on same infrastructure. They charge to take traffic at exchanges, one 100 byte URL in browser results in 2GB of data transferred from Netflix. It is a request that Comcast customer is making, trying to use the bandwidth and quota that the customer purchased, but Comcast makes money at exchange because they take on that 2GB of traffic. So they are already compensated for taking this traffic on both ends, by customer and at the exchange. Now on top of that they want to pry open the communication channels and charge more to the two parties talking. That's triple Comcast tax.
Comcast runs their cable programming on their tcp/ip network as well, so they are provisioned enough for now. If net neutrality goes away what promises youtube/netflix has that Comcast won't prioritize their xfinity platform over netflix?
The customers are using the capacity that they wanted and bought, Comcast sold that capacity, they must deliver. They are having no problem delivering so far. Networking gear (merchant silicone switches and OpenCompute switches) are dirt cheap, gone are the days of buying expensive gear from Cisco and BigIP. Cheaper networking hardware is making it easy to operate and upgrade for Comcast. Same goes for cable boxes, DVRs. Seen the disk prices lately? A raspberry pi can be effective cable box. Their unit costs have gone down significantly. They are benefiting from Cloud platforms like everyone else. Netflix uses AWS, Amazon uses AWS, Comcast uses AWS.
Look at hosting bandwidth costs, look at CDN bandwidth costs, content providers are paying for their side of it fairly. Comcast has a large share of CDN and can get even bigger there.
I think content providers should pick a month and ban entire Comcast network for a month together. Users will switch to shitty stuff that phone companies are selling but at least Comcast will learn a lesson. What do you think would people chose to watch xfinity or would they switch to telco ISP?
ISPs compete on the basis of their ability to provide residential bandwidth at competitive prices:
Suppose one ISP offers 1 Mbps up and down for $99 per month and another ISP offers 10Mbps down and 0.25 Mbps up. Both of these plans may cost the same to provide. Similarly, a 0.5 Mbps dedicated bandwidth circuit may cost 2x or 3x the cost of the residential circuit to provide.
Individual ISPs determine what markup to apply and how to price the bandwidth (with or without contracts, etc.). You are arguing that all circuits should be dedicated bandwidth circuits. There is nothing wrong with that argument, but it reduces the value of every piece of copper or fiber in the system because it prevents it from being maximally utilized.
Also, keep in mind that if a law were passed requiring all circuits to be dedicated bandwidth circuits, ISPs would have no incentive to preemptively upgrade hardware. Notice that customers do not demand symmetric dedicated bandwidth circuits. For most residential customers, only a minimum amount of upstream bandwidth is needed (for ACKs and the occasional upload) because most of the data is flowing to the customer and being watched on a screen.
T-Mobile's "Binge-on" service is a brilliant way of applying QoS to consumer demand to extract more value from the network, yet it was criticized as non-neutral. It's amazing the level of misunderstanding that is attached to net neutrality!
When did I say I am asking for dedicated circuit?
I actually granted that congestion could and would happen. I pointed out what happens if someone decides to saturate the line... would last only few hours each month before quota being hit.
What you are granting Comcast doesn't make sense technically, financially, legally or ethically. Don't open my packets other than headers for destination. Don't look inside the data of my packets. Don't offer intermediate certificates posing as proxy for end site. All those things are fine within a corporation's privately owned network. Comcast is similar to post office, they are not allowed to see inside my mail to see if it goes to bank or to insurance company, just the address on the envelope can be used. It is none of Comcast's business whom I talk to and what I talk about and how much I talk. As long as I am under quota and under bandwidth limit, they must carry the traffic.
In the catastrophic event they can stop traffic to certain IP address segments to keep voice lines and emergency sites accessible. They can work that out with regulators like for 911 service. But they can't use that as a way to extract payments from content providers. Complete stopping is preferred over degraded service. Comcast would have to come up with justification why they stopped the traffic, degraded is just a play to get ransom payment.
A regular HTTP GET is meant to be cacheable and meant not to be considered private. If you want private, use SSL and do not encode information in URLs that can be abused by intermediaries.
I realize you consider the attempt to charge upstream providers a fee to ensure high quality throughput extortion, but the fact is, some services utilize 99% of bandwidth.
Take the typical residential ISP, 99% of the upstream bandwidth it purchases likely moves traffic from youtube, youporn, etc. In the remaining 1% are gmail, HN, VOIP, etc.
The natural move would be for the ISP to adjust QoS to favor minimal streaming quality that will prevent customers from defecting to another ISP.
But content providers compete on the basis of content variety, quality, etc., and so their incentive is to maximize quality. If you are 1% more likely to click on an ad after watching porn at 4K, then it's potentially worth it to youporn to serve only 4K quality video since bandwidth is cheaper at scale and highly predictable.
But an ISP is operating at smaller scale. For last mile circuits, bandwidth cost is bound by hardware investments, and so a disproportionate amount of the cost of Youporn's added 1% chance you'll click is borne by the ISP.
So how can the ISP align its own incentives with youporn? Simple, by threatening a QoS that will reduce network load in exchange for a fee that helps share the cost of the additional bits.
So it's not extortion any more than Uber surge pricing is extortion. It helps increase the efficiency of the market process going on by aligning incentives where previously they were less aligned. Strong market incentive exists for ISPs not to overplay their hand, and to date as far as I know this hasn't been a problem.
I agree that last mile monopolies are bad, but the solution isn't to entrench them with top-down regs that hide the problem.
Customers demanded better internet and paid more for it, to access youtube, pandora, facetime, facebook, twitter, flicker, netflix and MMOGs.
Comcast invested in faster CO side equipment because there was customer demand for faster internet. The coaxial cable was still the same, customer still paid for modem in the house and paid for upgrade to DOCSIS 3.0 modems. Investments here by Comcast are same as any internet giant invests in a data center equipment, there was no new digging of last mile by Comcast, it was same as what it had been for last 25 years, laying coaxial cable when homes get built. And Comcast did charge more for faster speeds. Customers paid for faster access to the web. Just like content providers upgrade from Pentium to i7 on servers, Comcast upgrades were cost of doing business and it did pass that cost to customers in terms of more money charged for higher speeds.
>All content providers are in the business of creating bits which must be carried across space, and there are some kinds of content where local offers a big advantage. Many of these are yet to be discovered, as local circuit quality has been fairly poor since the origin of the internet. Net neutrality makes it far less likely that any of these will be explored.
CDNs are working just fine on existing internet. Google or Netflix or Amazon moving content closer is not prohibited by concept of Net Neutrality. The request to the local/geo-graphically server originates from the site/app html-js-DNS/code based on geo-location of the end user. This is only limited by Comcast CDN build out and offering made available for sale. Comcast doesn't want to do that, they want to peek inside packets and be arbitrator of what happens based on contents of the packet, regardless of what the browser or server wanted the packet to do.
Comcast being allowed to do deep packet inspection is like opening up letters going to bank to see if it is for car payments and then delaying the envelop if bank doesn't pay the postal services extra fees. It doesn't matter if the customer selected overnight delivery, as long as bank doesn't pay postal service, checks don't arrive on time.
I firmly believe that people think of their ISP bill as something they pay for youtube, gmail, maps, photos, amazon, pandora, school/college/work websites. It is ISPs who should be thankful to content owners for making their product offering something that customers want. The canvas company wants to be able to charge more if a successful painting gets painted on it, after it has already sold the canvas, would that be OK?
The individual user at home bought certain amount of data transfer per second, and may be agreed to upper limit on total data transferred per month, the content provider paid their ISP bill to do the same e.g. Amazon AWS data transfer rates. Now, the individual's ISP like Comcast wants to hold their users hostage and seek additional payout from content providers for doing the things that they already took payments from their customers.
CDNs are different and fair. CDNs are micro sized data centers spread across the land that content owners can lease space/power/cooling/compute/storage/network from. Net neutrality opponents want people to get confused about CDNs and deep packet inspection. CDN does not require deep packet inspection. Comcast wants you to think that this is unsolved problem that they can solve if only people allow them to look inside their mail and read contents. No, thank you.
Can you imagine if gasoline companies asked for paybacks from car companies? Why can you imagine if tcp/ip companies ask for payback from online video companies?
You buy gasoline and you can use it as you wish, in a Ford, Toyota or a Craftsman lawn mower. You buy tcp/ip and UDP capacity and you use it as you wish on youtube, netflix or yahoo mail.
Can you imagine if same gasoline slowed itself down if it figured out that it was being used in a Hyundai and offered 91 octane if found to be used in a BMW? Costing you the same at the pump, but works differently by figuring out where it is being used, a Hyundai vs a BMW? Does the gas company has right to know which car I will be using the gas into? Can it reduce the value its product has to the purchaser, the person pumping gas, unless the car manufacturer pays it to unlock the full potential of the gas?
One can't do it with gasoline but can do few things with tcp/ip packets. Just because it is possible to open up an envelope mailed to the bank and hold bank hostage for additional postage, doesn't mean postal service should open up the mail. Just because it is possible to open up tcp/ip packet and see if it is headed for youtube vs vimeo, doesn't mean ISP should do it. It is not ethical, it is not legal. Find the shortest path to the destination and forward it on, post or packet.
Youtube Red is available for $9. Ad-supported Youtube itself is free. Comcast charges $70 for 100 Mbps connection. $40 for VOIP phone.
Average Comcast bill is $120 a month. Comcast has a goose that lays a golden egg every day, they are out to slice it open for reasons beyond me. Comcast share holders should take company executives at task for risking their investment over opposition to net neutrality. Ask Comcast to cut costs. They are throwing dirt in your eyes over "boogeyman of Net Neutrality keeping the stock from soaring" while throwing money to the wind. Comcast should reduce costs and make itself more profitable. Comcast should introduce innovative products that customers want and will pay for like its VOIP and home security product line. A more fine grained CDN deployment would be great product idea. Comcast engaging in political debate bating against its own customers wishes will only empower activism against the company. The Comcast executives are burning the brand value in a bonfire right in front of the share holders, such destruction of share holder value shouldn't be tolerated.
If Television sets manufacturers created "Information Service" that plays short funny video clips instead of ads by deep inspection of HDMI signal, or a centralize service tracking ad start-stop times publishing it over internet, would that be OK Comcast? You are jealous of google and facebook's ad revenue. What if Samsung decides to cut in on your ad revenue on MSNBC? Samsung TVs won't show ads on MSNBC because they don't pay Samsung, it plays CNN ads just fine because Time Warner paid the ransom to Samsung.