Net Neutrality’s Unintended Consequence

By: Danny McPherson -

Most of the discussion surrounding net neutrality to date seems to revolve around fixed broadband consumers complaining that ISPs are unjustly mucking with their traffic, discriminating between different traffic types, and providing prioritization without their consent — and the providers shouldn’t be. Rob took a bit of a consumer-centric view to practically addressing net neutrality in his blog post here, I’m going to take more of a ISP-centric view.

ISP actions have centered around attempts to ensure fairness across subscribers (e.g., where contention may exit because of asymmetries in available bandwidth, or shared medium such as cable environments), and optimize network resources, in particular bandwidth utilization at various points in the network. Generically speaking, these network resources exist in one of three primary locations:

  1. Access network capacity: This relates to the bandwidth available between the subscriber’s cable modem and the MSO’s Cable Modem Termination System (CMTS) with cable-based Internet services, or the subscriber DSL modem and Digital Subscriber Line Access Multiplexer (DSLAM) in DSL networks. One of the primary distinctions between these two types of access networks architectures is that, because cable employs the existing shared HFC cable plant, cable access is “shared” across multiple subscribers. Downstream traffic (network -> subscriber) is multiplexed onto a TV channel that is shared between a group of cable modem subscribers. DSL, on the other hand, is “dedicated” in the sense that each digital subscriber loop is allocated a discrete channel from a set of available channels. The offshot with the cable access model is that during periods of heavy utilization subscribers within a given group may experience performance degradation because of high-bandwidth users in the same group. With both cable and DSL, traditionally, available bandwidth was much narrower upstream (subscriber -> network) than downstream, hence asymmetric DSL (ADSL) services, which are similar in cable offerings. The primary reason for this was so that, unlike a synchronous service, higher frequencies could be allocated downstream, providing subscribers nearly 2x download speeds. This, of course, makes assumptions about what applications subscribers are using (assumes larger download capacities v. upstream P2P traffic, video uploads, etc..).
  2. Internal network capacity: Internal capacity includes traffic from DSLAM or CMTS to on-net access servers, local caches or content distribution infrastructure, often including email and other ISP-offered services, and traffic being carried to points at which the ISP inteconnects with other ISPs and content providers. Also, in both cable and DSL architectures, subscribers can’t communicate directly, so it’s necessary for traffic to be switched locally by the DSLAM or CMTS, or routed between devices further upstream within the broadband ISPs network. Often P2P and other local user-user traffic would be included here.
  3. Transit “Internet” capacity: Because ISPs that offer broadband services typically focus in access markets, they’re often considered eyeball heavy. That is, they’ve got lots of users, but little content. What this means is that most of their users access content that doesn’t reside on their network. In order to provider connectivity and access to this content, they either engage in bi-lateral interconnection agreements with content companies and other types of ISPs, or acquire transit services from ISPs that provide this connectivity. Lower-priced transit services from ISPs may range from ~$100-$300/mbps or more monthly recurring, just for IP access, in addition to transport infrastructure costs, which includes the local loop and often long-haul backbone circuits upon which IP traffic is carried. And they’ve got all the associated capital investment, of course. Scaling this capacity for millions of users is a significant cost. Recall that unlike a utility, your Internet transactions could be with devices just down the street, or across the globe. Infrastructure has to be provisioned to accommodate these any-any connectivity models.

Broadband access has obviously not been what most folks might refer to as a high-margin market, with profits in the 5-10% range (after removing less-fortunate outliers). Given that most of these ISPs are publicly-traded companies and have shareholder expectations to meet, something has to give. Two things broadband ISPs have traditionally been most concerned with are subscriber growth, and minimizing subscriber churn. Growing average revenue per user (ARPU), and ideally, associated profit margins, has been a key driver for services convergence in the form of triple play (voice, video, and data). However, with the higher revenue services comes higher consumer expectations, in particular for services availability, performance and security. Furthermore, minimizing call center volume is key to optimizing profitability, as with traditional data services only yielding 5-10% profits with low ARPU services, a single customer help desk call can often snuff out profitability for 3 years or more!

ISPs simply can’t continue growing subscriber numbers and access speeds without continuing to invest heavily in Internet transit and interconnection bandwidth, internal network capacity, and access infrastructure. Looking for ways to offset the operational costs associated with these various investments is critical. Some ways of doing this include initiatives such as P4P, or investing in infrastructure that time-shifts lower-priority traffic into network utilization “troughs”, providing more real-time protocols such as VoIP with the network performance characteristics they demand. Peak-to-trough access network utilization rates today are often 4x or more, and because networks have to be engineered to perform without capacity problems during peak utilization periods – capacity planning for ISPs becomes a painfully expensive ordeal. This is why traffic management for ISPs is a critical function – liken it to the PSTN’s Mother’s Day problem.

I don’t believe exploiting protocol behaviors by doing arguably unethical things like injecting spoofed spurious TCP RSTs is the right answer, as that’s just going to piss subscribers off, increase call center volumes and subscriber churn, further compromise transparency, potentially break applications and result in non-deterministic network behavior. Unless there are incentive structures in place to encourage users to change behaviors (e.g., that of how their P2P protocols utilize network bandwidth) then nothing is going to change.

Which finally, leads me to my point (yes, there is one). Consumer advocates say ISPs shouldn’t discriminate, shouldn’t attempt to time-shift traffic, and basically, shouldn’t gate subscriber traffic in any way. So, under the auspices of the net neutrality proponents, if you’re an ISP, pretty much all you can do is one thing: change your billing models to change subscriber behaviors, and generate more revenue to fund further build-out of your infrastructure. That is, bill customers differently. Be it either strict metered services (usage-based), or more sophisticated usage-based services that introduce peak v. off-peak, on-net versus off-net, distance-sensitive, domestic versus international! It certainly costs more for a US broadband subscriber to obtain content or engage in a VoIP conversation with someone in London, or Singapore, or Cairo, as opposed to someone across the street. Who bears these costs, costs which have traditionally been “transparent” to subscribers? Think about it, this all you can eat model can’t continue, and users don’t change behavior without being incentivized to do so.

Why do the mobile folks have such high ARPU, and better profitably per subscriber? Because of a slew of billing models they have that make users accountable for network resources they consume. Ever use data roaming services on your mobile handset in another country and discover at the end of the month how incredibly expensive it can be? There’s a good reason for this.

Interestingly, technology hasn’t been at a place where these types of IP-based metered billing models were a viable option. Today, they are, and ISPs are being given little alternative. And trust me, your Internet access bill is NOT going to get cheaper as a result. We’re starting to see basic metered models emerge already.

Net neutrality advocates, be careful what you wish for…

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