Theoretically, China's unique CATV industry is organized in a four-layer hierarchical structure. First, there's the nationwide network. Secondly, each of the country's thirty-odd provinces runs its own CATV network. Then each municipality owns a cable network, and finally, each county below the municipality level runs its own network. In reality, this structure is not always so fixed, as some government levels merely perform administrative functions while others actually own a physical network of services. Even so, there are still thousands of CATV operators in China and almost all of them are owned or partly owned by some level of government.

The country is currently undergoing a major effort to consolidate CATV networks. The first step is to consolidate all networks up to the provincial level, so that each province will run a connected cable network by merging and unifying the networks within its provincial territory. The aim of this is to provide a foundation of operational scale and reach. Leading the effort is the State Administration of Radio, Film, and Television (SARFT), the government regulator that sets state policies and regulations for these industries. Each CATV operator is owned by the respective administrative branch of SARFT, so in essence, the regulator is the operator.

This consolidation is part of China's Next Generation Broadband (NGB) initiative. It involves an upgrade of the country's CATV systems to two-way transmission and the deployment of a distributed conditional access system to deliver high-definition TV, 3D TV, Ultra HDTV, and multimedia. The NGB will enable China to move towards an all-digital, all-IP world. By the end of this year, the aim is to turn 50% of all networks above the municipal level into all digital and IP services, and by 2015, for 80% of all networks to feature two-way services. China's CATV industry is also expected to grow from the current 28 high-definition channels and one 3D channel to at least 100 HD channels and 10 3D channels by 2015.

There is still a proliferation of Ethernet over cable (EoC) but DOCSIS has gained ground recently through what is known as "C-DOCSIS". This localized version of DOCSIS architecture pushes the traditional CMTS further to the edge of a Converged Media Converter (CMC) to deliver bandwidth to some 300 homes more cost-effectively than a CMTS.

All in all, the country is gearing up for delivering the 4As: anywhere, anytime, any device, and any content. Multi-screen access to content is a priority. Although the market is big, it can be confusing for equipment vendors and revenues can be elusive. Layers of bureaucracies, shifting priorities and timelines, and intricate distribution channels have contributed to market inefficiencies that hinder the growth of this industry. Cable in China is caught between the need to provide a commercial service and adhere to its function as a governmental branch that has to carry out state goals and priorities.

Written by Will Yan, Senior VP, Worldwide Sales at Incognito Software

This region is primed for expansion and ready to usher in an era of unprecedented new communications and entertainment services. While discussions about new apps and tools are certainly appropriate and interesting, a different topic grabbed my attention at CCTA — customer retention and building customer loyalties. One would have thought that, in this fast-developing market, the focus would be on how to sign up as many customers as possible. However, the keynote panel was instead devoted to customer retention. It shows that operators haven't lost sight on one of the key fundamentals of running a business — building long-lasting relationships

You know that operators are worried about losing subscribers when they start talking about retention. In North America, some 1.27 million households are no longer subscribed to cable video services, according to one of the presentations. At the same time, over-the-top (OTT) content has become a fact of life, with more and more people opting to view video online through providers such as Netflix, Hulu, Boxee, and others.

It's now more critical than ever that broadband providers offer fast service, consistent quality of experience, and the ability to reliably deliver optimum service packages. Issue resolution and outage mitigation will also go a long way to help you retain those customers that you worked so hard to acquire, while providing accurate usage data to customers will enhance trust and loyalty.

Research tells us that differentiated services enhance customer retention. Providers need to find out what consumers want and deliver that reliably, and to have superb customer care processes to back up those services. On the flipside, repeated service calls, inaccurate billing, and degraded service quality will drive customers to your competition. It sounds logical enough, but as people who work in the trenches will tell you, getting this right can be easier said than done. In the past few years, operators have implemented a variety of tools to optimize their back-office support and improve quality of service. This includes the integration of operations support systems (OSS), service-monitoring tools, and service portals to capture customer feedback. Operators are increasingly focusing on ways to maintain effective communication channels with their subscribers, providing more options for communication and self-service.

Now, operators face the daunting task of sorting through mountains of subscriber usage data. Understanding usage patterns can help you meet customer demands at various levels. At the network level, it allows you to better plan network expansions and meet your growing subscribers' bandwidth consumption needs. At the individual subscriber level, understanding usage patterns enables you to offer more relevant service packages, which may include both post-paid and pre-paid options. At the application level, you can use this data to create a better user interface and an easy-to-use search and navigation guide. Finally, at the commercial level, network intelligence can help you deliver the audiences that advertisers crave. Technology such as IPDR, among others, offers insight into traffic and usage patterns at the per-subscriber level, allowing you to take action to substantially improve the customer experience. Investing in sustainable infrastructure is not a cost but an investment in long-term business assets — customer growth.

Operators need to find ways to streamline operational processes to gain efficiency, decrease outages, reduce mean time to repair (MTTR), and shorten mean time between failure (MTBF). This will save costs by cutting down on expensive truck rolls, which can add up to more than $200 each time, and customer service calls. But perhaps more importantly, these steps also improve the subscriber experience. After all, customer care and quality of service are advantages that cable operators have over OTT providers, who can only offer their best efforts, and cable operators need to focus on this competitive edge at a time when many customers are looking for reasons to justify their cable video subscriptions.

Clearly, customer retention is a topical idea, even in a fast-growing market like the Caribbean. Bermuda in January was a unique experience — the weather wasn't the typical hot Caribbean weather that you'd expect, and the water wasn't warm enough to swim in (except for a few daring "snow birds" from the north!). But this cool and revitalizing paradise was an appropriate venue for a conference that kicks off the year, and just like taking a dip in the ocean, it was refreshing to hear the topic of customer retention gain so much attention. As we embark on another exciting year of broadband innovation and growth, I'm sure that this is one subject that will continue to be relevant for a long time to come.

Written by Will Yan, Senior VP, Worldwide Sales at Incognito Software

The blog says "Sandvine's traffic statistics have showed continued growth in adoption of live streamed sports events, but for the time being it is no threat to replace viewing via traditional broadcast methods."

As Sandvine observed, for the Super Bowl, it makes sense that most people would prefer to watch the game on large screen HDTVs.

After all this is live event TV — an unofficial holiday when so many of us gather with friends, eating massive quantities of foods that we swore off a month ago in our New Year's Resolutions. Broadcasting is the right technology for such content distribution.

But how many of us had narrow band sidebar checks at different parts of the game, trying to look up different statistics in order to provide our own colour commentary? Perhaps you checked your mobile device after the second half kick-off return for a record breaking touchdown run.

What role did the internet play in your Super Bowl viewing experience?

Written by Mark Goldberg, Telecommunications Consultant

I don't think it's a surprise to anyone, but it's the Christmas season again and doubtless a large number of television sets will be sold as part of the annual retail festivities. But these days the devices for sale in the shops are not just televisions: today's television is perhaps better described as a media computer with a very large display. Sure, the device can tune in to radio transmissions and display them, as one would of course expect from a conventional television, but the device also is equipped with either a WiFi or an Ethernet jack, or both. This alone sounds like a relatively innocuous addition to the television, but it's providing to be a highly disruptive change in the traditional Internet market space. Behind that network interface lurks a highly capable computing environment, with embedded applications and services that turn the television into a highly capable communications device. And embedded into the device is a set of interfaces into a world of streaming video content, all provided over the Internet. All this is starting to be all very disruptive to a number of broadband access providers business plans.

As an illustration of just how disruptive this can be, its interesting to review some events that occurred South Korea at in February 2012. At that time Korea Telecom (KT) made public its quite surprising move to block Samsung's "Smart TVs" from downloading streaming content over KT's consumer broadband network. In essence, KT's blocking move transformed the device back into a "dumb" TV, and needless to say neither Samsung, nor the hapless consumers who had purchased these devices to use with a KT broadband connection, were overly impressed.

South Korea is a country that proudly proclaims its effective saturation of its domestic population with high speed broadband access services, and rightly so, as this is a notable achievement. Megabit speeds are common and these days experimental deployments of a gigabit access service are underway in parts of the country. So it's not without some small element of surprise to hear a KT representative claim at a recent OECD meeting at the OECD that deploying a device that actually makes use of this broadband infrastructure is in some fashion "unfair," even "damaging," and indeed so "damaging" to the network that KT felt it necessary to pull the plug on these devices.

Evidently, according to Korea Telecom, Samsung opted to take a "very negative response" to KT's actions. Samsung obtained a court injunction to lift KT's block on their TVs and an associated order for KT and Samsung to enter into arbitration. At the same time Samsung filed a lawsuit against KT. In due course the temperature of the dispute abated and all the parties backed down. KT discontinued its block, and Samsung dropped its lawsuit. However, there was evidently some residual bad feeling here as Samsung expressed their desire for the national regulator to convey a "strict warning" to KT over its actions.

What KT was after is quite simple: they were insisting that Samsung, and other local "Smart TV" vendors in the Korean market, must pay a levy to KT to have their devices deliver their content over KT's broadband access network. Predictably, Samsung officials said in response that they had no intention of paying KT for network access for their devices.

Samsung remains publicly confident that the Korean regulatory position will continue to support its position, but it raises a larger spectre across the generally buoyant Internet consumer content industry. The threat here is that if the incumbent carrier is able to carry out its threat and block these devices from the network unless the manufacturer comes to a prior agreement with the carrier to pay some form of levy, then it would set an unfortunate precedent that would have repercussions across the entire Internet. This contretemps potentially extends way beyond Samsung and KT, and draws in LG and Panasonic and also potentially draws in Microsoft and its Xbox, the Sony Playstation and the Apple TV, to mention some of the more prominent vendors of the current generation of streaming content devices.

Video is by no means novel and video over the Internet is also by no means novel. Why has this become an issue in 2012? Why didn't it surface years ago with, say, the emergence of YouTube in 2005?

A combination of various factors is certainly placing some new pressures on local Internet access infrastructure, and the shift from broadcast television to streaming video is central to the picture. Are these carriers' claims of "overuse" of the network justified? Just how much data does a streaming video TV pull through the access network in order to generate a picture?

Today's television sets are typically 1080 lines with a 16:9 widescreen aspect ratio, so that the screen is 2.1 megapixels in size, with a display rate of some 24 frames per second. Without compression, using a three color system with 16 bits per color, this display is equivalent to a data rate of 2.4Gbps in a raw (uncompressed) format. A typical video codec can reduce this data rate considerably, and a high quality HDTV video stream can generate a sustained data stream of between 10Mbps to 20Mbps through a high quality codec, although it is more common to see compressed HD video content using streaming rates of some 3Mbps - 4Mps. Even this rate is of course far higher than that used with the small format video streams used for video display on computer screens, which are typically around 10 times smaller at 300Kbps - 500Kbps.

As well as the data volume, there is also the factor of the transport protocol used to pass the streaming video data to the consumer. Steaming protocols are not exactly the most social of protocols on the wire. They are typically based on the Real-time Transport Protocol (RTP), and typically use a unicast UDP streaming transport model. Unlike DCCP (DCCP is not feasible due to the high density of deployment of basic edge firewalls which would effectively filter out DCCP as an unrecognized transport protocol) or even TCP, these unicast streams do not conventionally perform any form of congestion-based date adaptation.

That's not all in terms of the factors that make the current round of streaming video content uncomfortable for the network. Consumers tend to behave in similar ways, such that there are pronounced peak periods in the day. Like the physical transportation infrastructure in a city, it's not the average load that matters. What matters for most users is the match of the peak load to the infrastructure capacity. In the case of these "smart" TVs the peak load considerations in the network occur the 6pm to 9pm evening time slot.

A further factor here is that consumers tend to treat a "smart" TV as a TV and not as a computer, and when they leave the TV, they tend to leave it running, rather than shut down the video stream when they are not viewing it. This is particularly prevalent where there is no marginal cost associated with leaving the streaming device on, such as is the case in a flat rate tariff environment.

And finally there is the factor of the access provider's network provisioning model. Access networks are not engineered on a zero contention model. When an access provider connects 100 consumers each with a 100Mbps broadband service, then it is not the case that the feeder network would be provisioned with 10Gps of back end capacity dedicated to these 100 consumers. While published details of the precise nature of the engineering in access networks are scant, contention ratios of 100:1 are not uncommon in this area, where one unit of back end feeder capacity is provisioned for every 100 units of access capacity delivered to the consumer. While gigabit networks are now in the area of commodity systems, higher speeds in the back end of these access network, such as 100Gbps, just do not exist, and even 40Gbps systems attract an unwelcome price premium simply because they are some years ahead of the technology curve. And the older the broadband deployment, such as is the case in Korea, the more likely that the back end networks tend to lower speeds and higher contention ratios. So while the outward statistics of the broadband network may look impressive, with provisioned speeds of up to 100Mbps, the contention ratio in the provisioning model may be very high, so that if every consumer attempting to pull down 100Mbps of content at the same time the network would simply be unable to cope.

If the back end of these broadband access networks are so heavily over-committed, then why was this not such a public problem for many years? Much of the answer lies in the evolution of usage of the network and the difference in behaviour between TCP and UDP protocols.

For many years the Internet was a predominately TCP network. The main data volume in the network was various forms of file transfers that were parts of web pages. parts of a peer-to-peer file sharing network, shared data sets, or just about anything else that involved the movement of data from one machine to another. None of these applications were "real time" applications, and in general the network transactions that passed these data elements around were based on the TCP protocol. Recent years have seen a shift in data volumes on the access networks such that video streaming has supplanted all other applications as the major application by data volumes on the access network in many parts of the world. And video streaming is a UDP application.

So if we look at protocol behaviour for a second, TCP is a rate adaptive protocol, and over the course of long held sessions multiple TCP users tend to equilibrate their use of the common network and each TCP session receives an approximately equal share of the constrained network resource. One TCP stream cannot "shut down" any other TCP stream. Under conditions of network congestion each TCP application will reduce its data transfer rate to a level that alleviates the congestion pressure. This is generally not directly visible to the consumer, in so far as the vagaries of second-by-second file transfer rates are not normally prominently displayed as part of the user's interface to the network. In essence, TCP performs its rate control function quietly and with direct visibility to the end user. On the other hand, UDP has no such adaptive flow controls, and in a video streaming context each stream will attempt to push a relatively constant data rate through the congested network bottleneck irrespective of the congestion level in the networks through which the streams are being pushed. Network contention implies lost UDP data, and in the case of video streaming this lost data means compromised picture quality in the streaming video application. In other words this saturation condition in the back end of the access network becomes highly visible to all video streaming users.

The Carriage Perspective

KT, like many carriers, has its own IPTV service, but this service is evidently not madly popular with consumers. The IPTV service is conventionally modeled on a broadcast TV model, where a single stream is fed to all consumers simultaneously via multicast. This is distinct from the content streaming model, which is more like a DVD library model where each consumer can program their own content in their own time. The content streaming video models have proved to extremely popular with consumers, but now there are no carriage efficiencies to be had, Instead of multicasting a fixed number of IPTV channels through the network each consumer is receiving their own unique content stream. Consequently, video streaming traffic levels are on the rise in the carriage network, and this has some potentially interesting implications on the contention levels in the back end of broadband access networks.

This shift in the consumers traffic patterns with high definition streaming video content and smart TVs is presenting new challenges for the carriage provider of broadband access services. It's no longer a case of a conventional "heavy tail" of distribution, where 10% of customers are responsible for 80% of the traffic, such as was the case when file sharing was the predominate traffic component and the so-called "super seeders" were the high profile users of the network. In a streaming content environment the peak profile of usage is such that a much higher proportion of consumers are consuming large traffic volumes at peak times, and the access network is failing under congestion load during these peak usage periods. In other words as well as observing a small number of users contributing to the average traffic volumes for the entire network, we now also see a broad set of users equally contribute to the peak traffic load, and now the claim is being made that this peak traffic load is overwhelming the network's capacity and compromising service quality for all the network's users in these peak periods.

In many consumer markets we are used to the good being sold using an incremental tariff. Purchasing two apples will normally cost twice the amount of a single apple. More generally, if a consumer consumes a greater quantity of the good, then the consumer is charged a higher tariff in proportion to the quantity consumed. The higher tariff provides incentive for the producer to produce more of the good, and the market equilibrates the unit price of the good between the consumer's perception of value for a given quantity of the good and the producer's estimation of an efficient production price. But where the good is sold on a flat rate basis, such as unlimited flat rate broadband services (such as those retailed by KT), then these conventional market incentives do not work. The consumer is incented to consume more, as there is no marginal cost associated with consumption, but the producer is motived to produce less, as there is no marginal revenue associated with higher demand. Where demand rises in a flat rate tariffed market then, according to one industry presentation I heard last week, the producer reports that: "we have a decoupling of revenues from traffic."

The obvious response to this escalation in traffic volumes would be to construct higher capacity back end subsystems in the access network. But in a flat rate tariff environment the business problem is that any such investment in the network would be funded by their existing revenue margins, as the flat rate tariff implies that for a long as any increment in network capacity is consumed by the existing customer base then the costs of that increment in infrastructure capacity are being funded by the business, not by the customer base.

An obvious response would be to introduce volume-based tariffs, or "data caps" as they are often called. In some markets, such as Australia, this retail model of data caps is so widely used that unlimited flat rate offerings are viewed with some suspicion as being of compromised quality by the consumer.

In other markets, including Korea, the flat fee model is so ubiquitous across the broadband retail market that the claim is made that any attempt to introduce data caps would be tantamount to commercial suicide, or so the operators in these markets claim. They see the introduction of any form of volume-based retail tariff to be simply not an option for them. So deeply held is this opinion that in these "flat rate" markets a number of carriers are trying to engage the content industry in what the carriers would call "cost sharing" models, but the prospects of any mutually satisfactory outcome from such engagements are dim at best.

It seems like these flat rate access service providers have managed to wedge themselves between a rock and a hard place. On the one side we see the content providers exploiting this flat rate tariff structure with a streaming video content model that imposes high volumes of data upon the back ends of their networks at peak times, and they claim that this additional traffic does not generate any revenues form the customer base, so any efforts to add further capacity to their networks is going to be funded by the carriage provider out of the existing revenue margins. On the other side they firmly believe that efforts to introduce data caps after many years of operating on a flat fee structure would push their customer base to use competitor's products and drive them into business failure for this particular activity, as well as attracting a strongly unsympathetic consumer reaction, which would be a public relations disaster.

The Content Perspective

What about the picture from the other side? A good a perspective as any comes from Netflix, an entity that has wholeheartedly embraced streaming video content delivery. Today, according to a report from Netflix to the same recent meeting at the OECD, Netflix has more than 30 million customers, predominately in the Americas, but also in the United Kingdom, Ireland and, most recently in the Nordic countries.

The Netflix offering is a flat fee system that allows the customer to stream videos without incremental cost per session. They have taken an earlier DVD library model, where the entire library is available to the customer and reproduced this in an online environment. This model has been so successful commercially that Netflix is now following in the footsteps of HBO in producing its own content, releasing the entire series at once, allowing the customers to select how they wanted to view the series.

Not surprisingly Netflix's business model is based on a retail broadband offering that is essentially an unlimited flat fee offering. In this way the customer is not exposed to any incremental marginal cost in choosing to watch streamed video content, as compared to broadcast, cable or DVD material. And equally unsurprisingly Netflix is supportive of a position that is opposed to the introduction of volume caps in retail broadband tariffs in those markets where Netflix is active, and on a consistent theme, Netflix strives to ensure that in an ISP's offering streamed Netflix content is not tariffed within the volume caps.

Of course Netflix is not the only such "over the top" service provider in this area, and there are now a number of such streaming providers offering services in these markets. The increasing prominence of this form of service in the market place the more weight is placed behind the pressures for flat fee based broadband services, or at the very least exemptions for video streaming services from volume caps.

Netflix, like many content provides, appears to be strongly resistant to any suggestion that they subsidies or fund the delivery of content to the user. They argue that they have already funded their Content Distribution Network (CDN), and at their cost have brought content close to the user through the deployment of CDN Points of Presence at major exchange points and the execution of peering arrangements with those service providers willing to enter into such arrangements. I have heard the content folk argue that to enter into financial relationship with a service provider with whom they do not necessarily have any direct network interconnection relationship, and over traffic flows that are initiated and maintained by the service provider's users rather than by the content provider, would conventionally be considered as extortion in other contexts.

To Flat or Cap?

The recent calls for the introduction of "sender pays" into the network's commercial landscape, championed in recent times from European Telecommunications Network Operators (ETNO) show that KT's perceived plight is not just an isolated case. It appears that many of the broadband access carriage providers, perhaps notably those that invested heavily in "triple play" and other forms of bundled IPTV offerings, are finding that the own business models are foundering. The flat fee is not covering their costs of investment in network infrastructure, and the expanding data volumes arising from the shift towards content streaming models bypass the service providers own multicast IPTV models just as much as they bypass traditional broadcast TV. The expectation that users would augment the basic flat fee offering by spending money on the service provider' own premium content offerings have proved ill-conceived. The associated business structure that assumed that this premium content income stream would cross-subsidize a loss-leading flat fee entry tariff is proving to be an expensive mistake and yesterday's highly fashionable triple play is proving to be today's toxic liability. Consumers simply purchase the low-priced flat rate tariff and then purchase their content from third parties who evidently provide a combination of a massive array of popular content and extremely low flat rate fees.

It seems that when you have a business failure of this scale there are a number of options available, but some appear to be more sensible than others. One is to try and get the content providers to take the place of the service provider's own premium content offering, and force these entities to cross-subsidize the providers' basic flat rate broadband access tariff by paying the service provider to allow the service provider to pass the content to the consumer. And if the content industry is unwilling to pay then perhaps its time to invoke a regulatory impost, as seen by ETNO's recent attempts to introduce this measure into the negotiation process leading to the redrafting of the International telecommunications Regulations (ITR). But perhaps its folly to wander about making the claim that "you must pay for my poor choice of business models!" to anyone within hearing distance. Perhaps the problem here is that a poor choice of business models requires a change of the business model. If consumers are the source of revenue for a broadband access network then conventionally the tariff's levied on consumers need to cover the cost of the business. And where the consumer makes a greater use of the network by generating higher volumes of data on the network then there is a compelling case to expose this marginal cost to the customer. In the case way as my other utilities, such as water, electricity and gas are metered services, then perhaps an economically efficient model for the utility role of the provision of packets is by a metered service.

In any undistinguished commodity market, where there are incremental costs associated in the production of the good being traded in the market, then the long term prospects for a provider who addresses the market with a flat fee schedule are not good. The flat fee model provides little incentive to moderate the consumption of the good, and overconsumption causes failure of the provider's ability to sustain the production of the good. This is a situation that has a lot in common with the "tragedy of the commons".

The Internet has often been compared to the Commons, where a communal resource was owned by no one, yet it was commonly used to the benefit of all. It is not the concept of the commons itself that has become entrenched in our vocabulary, but the aspect of the "tragedy of the commons", where the unmanaged common resource was abused to the point of destruction. Each individual user stood to gain more through increasing their use of the common resource, and, as there was no governance of each individual's use of the resource, there was no penalty imposed for overuse. No single person or entity was responsible for the proper maintenance of the commons and the cumulative problem of degradation of the resource to the point of collapse was not a problem that any individual user was equipped to tackle.

In old English law the "commons" were areas of land that were held in common by the general population, "the commoners," as opposed to specific tracts that were held by the nobility. The grounds may have been pasture lands, woodlands, or open space used by the general population. The word "commons" is derived from Latin "communis" and means the quality of sharing by all or many.

Fourteenth-century Britain was organized as a loosely aligned collection of villages, each with a common pasture for villagers to graze horses, cattle, and sheep. Each household attempted to gain wealth by putting as many animals on the commons as it could afford. As the village grew in size, more and more animals were placed on the commons, and the overgrazing ruined the pasture. No stock could be supported on the commons thereafter. As a consequence, village after village collapsed.

(The analysis of this in a social context was explored in depth in the 1960's. These papers can be found here.)

The failure here is a failure of the flat fee access model. However, the underlying failure might possibly be attributed to a failure to a deep appreciation that the Internet is far more versatile than the telephone network it replaced, and the dynamics of change are a constant factor in the behaviour of the Internet. To base a network's engineering, and its business model on a single model of network use, and to assume that this will not change rapidly over time is perhaps the real folly here. To assume that carriage and content are so inextricably interwoven that when a consumer purchases a carriage product from a provider that the same consumer will be bound to also purchase premium content services from that same provider is part of that same folly. And to bind the two together in an intricate web of structural cross-subsidization simply adds to the problem, rather than offering any form of sustainable solution.

A commercially viable carriage provider needs flexibility to respond to changing usage patterns. When carriage providers use inflexible business models that trigger situations where revenues are disconnected from traffic volumes, what we are seeing is a knee jerk reaction to blame the generator of the increased traffic volumes, and try and make the content providers repair the revenue gap. However, such an approach does not have overly bright prospects for lasting success. It may be a more challenging, but a more sustainable, approach to expose to the consumer those points where incremental costs are incurred by the carriage provider by using a tariff structure that includes various forms of volume-based parameters., such as are used in a capped tariff structure.

However you look at it, a broadband access carriage industry response to smart TVs and the increasing proliferation of "over the top" video content streamers of "Your innovation has broken my business plan! You owe me money!" is not going to go anywhere productive. If the carriage provider's business plan is not working then perhaps its time to look at what went wrong and how it might be corrected, rather than blame someone else.

Written by Geoff Huston, Author & Chief Scientist at APNIC

Programming Rights Historically Elusive

Obtaining rights to mainstream content producers is the key to a Google Fiber success. Without the likes of HBO, The Discovery Channel and other must-have content for any TV package, the prospects dim for any competitor trying to enter the broadband-cable bundles which dominate the market. Time Warner Cable will be watching closely as Google moves forward to secure rights and compete head-to-head in Kansas City. Just broadband alone, using Netflix, YouTube and others to compete is not enough. Historically, incumbent service providers have been able to lock-down competitors in any semblance of affordable programming from top content producers.

"Fiber's biggest problem is that it needs backing from the big players, says Marguerite Reardon at CNET. The Discovery Channel, CNBC, AMC, TNT, Comedy Central, ESPN, CNN, and HBO are all glaringly absent. And Google may have a hard time convincing the owners of those channels — like Disney (ESPN, HBO) and Time Warner (TNT) — to climb onboard." From (Can Google conquer Cable TV?)

Google needs economies of scale going forward. That means it must target additional cities for Google Fiber, and quickly, in demonstrating to programmers it has staying power to compete effectively. Otherwise, programmers will shy away from any substantial deal with a new entrant. This entails having deep pockets and a willingness to compete for the long-haul.

By-Passing Hardware Vendors

Google Fiber seems intent on holding costs down by combining its own research and hardware. Project engineers have taken research from related Google hardware molding new hardware into low-cost products. The devices include a cable box, and hand-held device all seem to come from Google resources, like Google TV, Nexus 7 Tablet. New devices created include a stackable storage and network box. All these components add up to a quick and nimble broadband and TV package available for $120.00 per month. Boxes for additional TV's are separate from this package. Learning from those going before it, Google is forging a seemingly level-headed approach to combine resources in the venture, thereby keeping the $500 million price tag in check.

Potential Customers Must Show Interest

Kansas City's potential customers must register online for the project by paying a $10.00 fee, and their neighbor's must do the same to get in line for initial installation of Google Fiber. This pre-qualifying aspect is the marketing component which Google foresees as a must-have in moving forward with actual deployment. If the interest is not concentrated enough within neighborhoods, roll-out will be delayed until enough interests warrant the cost of installation. This could save tons of money on the front end with less truck-roll for individual installations.

Residents can either pay a $300.00 fee or sign up to an initial package like broadband and TV or just broadband to waive that fee. There will be a 2 year contract for packages. Signing up for free broadband is also available, but does not include the 1Gig version, only a standard speeds. Google is playing it smart, at least on the front end of their historic project, using milestones to move from one level to the next in roll out. If insufficient interest by neighborhood does not materialize, those neighborhoods will have to wait for the fastest broadband available.

Conclusion

While these factors; using in-house hardware, and qualifying potential customers will save money on the front-end, as stated, the determining factor will be competitive programming acquisition. It is worth watching to see how Google handles entrenched competitive forces with what many think is an innovative project at its best. But the Internet giant must not only navigate a competitive environment, it also must offer the best product on the market. That will ensure success over the long-haul, which means, pouring money into build-outs, programming, and marketing costs for a multi-year investment.

Written by Leonard Grace, Founder & Editor - Broadband Convergent

These are key questions to be discussed at the "Workshop on Congestion Control for Interactive Real-Time Communication” held on July 28, 2012, in Vancouver prior to the start of the 84th meeting of the Internet Engineering Task Force (IETF). Hosted by the Internet Architecture Board (IAB) and the Internet Research Task Force (IRTF), the workshop is focused on this challenge:

The development and upcoming widespread deployment of web-based real-time media communication — where RTP is used to and from web browsers to transmit audio, video and data — will likely result in substantial new Internet traffic. Due to the projected volume of this traffic, as well as the fact that it is more likely to use unprovisioned capacity, it is essential that it is transmitted with robust and effective congestion control mechanisms.

Designing congestion control mechanisms that perform well under a wide variety of traffic mixes and over network paths with widely varying characteristics is not easy. Prevention of congestion collapse can be achieved through "circuit breaker" mechanisms, but for media flows that are supposed to coexist with a user's other ongoing communication sessions, a congestion control mechanism that shares capacity fairly in the presence of a mix of TCP, UDP and other protocol flows is needed.

The workshop is INVITATION-ONLY and you need to submit a position paper to be considered for inclusion. Participation in the workshop is free of charge and there is an option for invited participants to participate remotely. You do not have to register to attend the week-long IETF 84 meeting that follows the workshop, although many of the topics in the workshop will be discussed in the subsequent IETF meetings.

THE DEADLINE FOR SUBMITTING POSITION PAPERS IS JUNE 23, 2012.

Much more information about the workshop and the submission process can be found at: http://www.iab.org/cc-workshop/

Written by Dan York, Author and Speaker on Internet technologies

Protecting a Legacy System

Clearly Comcast wants to protect its legacy cash-cow, Cable TV. By far it is the most profitable unit of its portfolio even though growth has stagnated and is in decline. A continued strong customer base, due to a significant market reach, solidifies strong revenues and cash flow which drive the engine that produces top profits. This will not be given up easily, and Cable companies will skirt the rules, if necessary, to protect those revenues. That is why Comcast has implemented barriers around that legacy system to ensure customer loyalty, making it harder for customers to disconnect or downgrade services even though they would welcome alternatives like OTT competitors to the high cost of Cable TV service.

It is a fine-line Comcast and other cable companies must walk to protect a huge investment in legacy content delivery especially with public sentiment favoring strong competition in alternatives to current Cable TV pricing. The impending fight will likely be bloody and nasty with company lobbyists, employees, and lawyers, pitted against big government.

DOJ Looks for Answers

A DOJ with a goal of looking into current Data Cap plans initiated by Comcast and Time Warner Cable (NYSE: TWC) investigating possible anti-competitive practices draws a clear distinction to companies which favor their own customers by treating them differently than competitors. Comcast implies its unlimited data plan for the Xbox 360, which favors only its customers and not competitors like Netflix, does not violate anti-trust laws since it does not use the public Internet to deliver content. A private network is being used, says Comcast. "The Xbox 360 "essentially acts as an additional cable box for your existing cable service," and that it sends the content on a managed network that's separate from its traditional cable delivery service.

The Free Press issued a statement saying, "The Justice Department investigation is great news for consumers and cable's competitors alike. For too long, cable operators have used their dominate positions in both the television and Internet service provider markets to kill off innovation, cut-off customer choice and keep prices high."

That theory is being challenged explicitly by the DOJ who draws a clear distinction on this particular type of Data Cap use and the implied discrimination it conveys. The distinction centers on anti-trust pricing or giving preference to existing customers over non-customers who want to view content from Comcast Internet applications. It both rewards and penalizes Comcast customers who may want to look at alternative content sources, since they must have an existing Cable Service account to receive a discount, while creating an obvious disadvantage to OTT competitors like Netflix (NASDAQ: NFLX), since non-Comcast customers are limited by the Data Cap. That policy could be construed as price-fixing, and anti-competitive behavior.

Favored Nations Clause

Additionally, the DOJ is investigating the Favored Nations Clause in existing contracts Cable companies have with cable networks. Programmers must sign agreements with Service Providers for distribution of network programming like HBO, TNT, etc. Those contracts extract a favored discount to companies like Comcast due to their size and reach. This according to the Wall Street Journal will deter programmers from looking to alternative carriers to deliver their products.

Anti-Competitive or Good Business Practices

With big money at stake the vehement part of this fight will be legendary. The implications of anti-competitive practices, market protectionism, and most favored deals will resonate across media outlets. But the bottom-line remains centered on deciding if this DOJ probe is big business, anti-competitive behavior or just good business practices. Being a large dominant player in an exploding content driven market across multiple platforms draws close scrutiny, and being both a content and distribution owner is even more risky.

Written by Leonard Grace, Founder & Editor - Broadband Convergent

More importantly they are making the hardware and software design of their CDN servers freely available. That means any network can deploy Netflix CDN boxes deep into their network to significantly reduce traffic volumes and improve performance for users. In addition to the Netflix announcement the IETF has started up a working group called CDNi which is looking at developing standards for interconnection and distribution of CDN networks globally.

These initiatives will have a significant impact for R&E networks in terms of Big Data, ensuring the Internet remains open and for creating new revenue opportunities. It is not only movies and commercial web sites that benefit from CDN networks. Any large data set that requires wide distribution, especially to mobile wireless devices can benefit from a CDN network. The high energy physics LHCONE network is a good example of a CDN network designed for a specific big data application. But there are many other large data sets in genomics, astronomy, social sciences, etc that could benefit from a generalized R&E CDN facility. Researchers and educators, like everybody else, want access to their data any time, any place and on any device. CDNs are critical to realizing such a vision.

To date CDN facilities have not been critical for R&E networks because of the ample bandwidth, but as more and more users are accessing the R&E networks through wireless connection, or through the commercial Internet (i.e. for Citizen Science or courseware applications), performance and throughput can be significantly enhanced with a CDN network. It is not only receiving content and data that CDN networks are important, but also for delivering content to the global Internet community. Unfortunately most commercial CDN networks do not carry research data or any type of public content such as courseware, public service multimedia, etc. That is why it is important that R&E networks deploy their own CDN networks, and like other CDNs deliver this content to commercial ISPs at IXPs and other facilities. In countries like Canada delivering content from small Canadian multimedia businesses and other organizations to fellow Canadians and the global community is also an important role for R&E CDN networks.

Deploying a CDN network could also be a revenue opportunity for R&E networks in delivering content to commercial ISPs and community networks at IXPs on behalf of public broadcasters, museums, and other public entities. Public broadcasters such as PBS, CBC, TVO, BBC, etc. are seriously looking at using OTT (Over The Top) distribution networks (e.g. Netflix) for their future direction. R&E networks could significantly reduce costs for these public broadcasters (and yet still earn significant revenue for the R&E network) in delivering this public content to the global community.

Working in partnership with community network initiatives, such as UCAN, Gig.U and public supported IXPs could be mutually beneficial for both R&E CDN networks and IXPs. A good example, as I mentioned in a previous blog the Canadian Internet Registration Authority (CIRA) is working with regional R&E networks to help deploy community IXPs with integrated support for multiple CDN suppliers. BCnet is another example which has deployed IXPs in small communities and is now looking at deploying CDN services to these IXPs as well.

NORDUnet and AARNet are also well positioned to be global players in deploying public CDN networks and insuring the communities they serve have a global voice for their content. Both networks have major peering connections at a number of major international IXPs. Initially these connections were intended to reduce costs of Internet transit, but in the longer run they may serve as an important infrastructure for delivering Nordic and Australian data and content to the world.

Finally the most important aspect of R&E CDN networks is that they can be designed to be powered solely by renewable energy. The beauty of CDN architectures is that users can be redirected to an alternate CDN node if the local node is out of service for one reason or another. Often CDN networks also do redirection if a user requests content that is not available in the local cache. So, for example, if a local node is powered by a wind mill, and it is a windless day, users can be redirected to another nearby CDN node. As opposed to other follow the sun/follow the wind architectures there is no need to transfer large data files with a CDN network. The Greenstar network demonstrated this capability where they can transfer a live HD video stream from one Greenstar node to another, anywhere in the world without a single glitch in the video stream.

Various estimates suggest that CDN networks already deliver over 40% of world's Internet traffic. On some networks CDN content is now approaching 90% of traffic volumes in peak times. It is time R&E networks take a leadership role to ensure that there remains a public CDN facility, and that carriers do not entirely capture and lock this market inside their walled gardens. We are already seeing this happen with recent initiatives from Verizon and Comcast and ongoing disputes with Level 3 etc.

Written by Bill St. Arnaud , Green IT Networking Consultant

Time Warner Cable (NTSE: TWC) and Comcast's (NASDAQ: CMCSA, CMCSK) intent in creating TV Everywhere conjured up a cable TV presence on the Internet where customers could browse and view huge varieties of content by just being a customer. That seemed a fairly simple and innovative concept formed to stem the eventual defection of their subscriber base to OTT content via YouTube, Netflix, Hulu and others. It was unique 3 years ago and promised to be exclusive to their clientele. But in reality the concept is much different than the original vision cable operators promoted. The danger is that being second to OTT's is that subscriber defection continues to be prolific.

Authentication and Distribution

The process of offering the Internet version of huge channel line-ups offered by Cable operators has hit a snag both in the authentication and distribution process. It seems that it is difficult technically to offer an authentication portal without hitting snags that usurp customer friendliness, and distribution rights to all that programming is being tied up in agreement squabbles with programmers. The ideal scenario would be to offer that programming to customers anywhere, anytime and on any device which would include Smartphones, IPAD's and other devices, living up to the title TV Everywhere. (See Plans for 'TV Everywhere' Bog Down in Tangled Pacts)

Industry in danger of being left behind

Subscriber erosion continues to proliferate as consumers find other ways to get their content with Connected-Smart TV's through services like Netflix, Hulu, Redbox, Soku and others which offer programming free as distributors look to connect directly to customers via OTT, not just through Cable Operators. This puts the pressure on cable to get its act together with TV Everywhere, making it easier to connect with all that programming currently behind pay-walls. It is a dilemma that operators must solve and quickly to circumvent a tide of discontent and dissatisfaction with the status-quo.

"[T]his is not the time to rest on their laurels, but to ask can the industry take further advantage of the opportunity and give consumers more of what they want. "By far the most powerful way to do that is what we call Content Everywhere," or TV Everywhere. We do risk letting others take this opportunity" if the industry doesn't follow through with determination". —Jeff Bewkes, Deutsche Bank Media & Telecom Conference (See TV Everywhere "Years Away", Viacom Executives Says)

Operators must solve TV Everywhere Issues

First the issues limiting TV Everywhere must be solved. Agreements with programmers must be reached without the competitive fear-factor operators seem to have in dealing with a new Internet environment. The days of locking up content behind a pay-wall, demanding customers buy all or nothing subscription plans is a dead leader. Alternative plans must be developed to entice consumers to buy programming with much more flexibility in pricing and bundles. Those packages must have a mirror to TV Everywhere on the Internet with viewing options on any device, coupled in solving the technical and CRM issues.

Leadership must Communicate Vision

Leadership from cable companies must be firm and concise. The message to constituents both internal and external must be clear. Urgency must be communicated often and without hesitation. That message must be that we are going where we have not gone before, to create a better product reflective of current market competition, and that we can compete effectively and win the customer with that product.

Written by Leonard Grace, Founder & Editor - Broadband Convergent

They tried and failed with UBB. Now they are at it again with "speed boost" technologies. The two technologies at question are Verizon's "Turbo” service and Roger's "SpeedBoost”. There are very few technical details, but it appears in the former case that users will be able to purchase additional instantaneous bandwidth to the detriment of other users on the same shared service. Whether this will make a difference to actual throughput is another matter because the slow video may be due to server problems and not network congestion. And if you are in elevator with very poor connectivity, you will unlikely get any faster download speed, no matter how many times you press the turbo button. But will Verizon give you a credit if you don't get the advertised speed boost? I doubt it. Similarly the Rogers' service, while still free, seems to imply faster speeds if they detect you are streaming a video, particularly from their own on-line service. Will users who are not streaming video, but using other real time applications get the same benefit such as VoIP or Telepresence? I doubt it.

The carriers continue to have this brain dead idea that bandwidth is a scarce resource — which is only true to the extent that were the ones who created this artificial scarcity. Building a business case around an artificial scarcity is as stupid as trying to make a premium market from air we breathe. Customers aren't interested in buying bandwidth or quality of service to enhance their user experience. Just as with electricity they want and expect that just about any appliance or application will simply work — with no need for special speed boosts and other gimmicks. Imagine negotiating with the electric utility for a little extra power when you needed to turn on your stove or TV.

It is last mile packet loss which has the biggest impact on the customer's user experience — NOT bandwidth or congestion. The Internet (TCP/IP) is designed so that packet loss is used as a signaling tool to reduce packet throughput. Regardless of where the packet loss occurs the Internet is designed to slow down any data stream, that is affected by a lost packet. However the rate to which a data stream is slowed down is greatly dependent on distance. This is why moving caching boxes as close as possible to the user affects end-to- end throughput, particularly if there is ongoing packet loss.

Although bandwidth and congestion can be a factors affecting packet loss, there are much more clever ways of reducing the impact of packet loss, especially in wireless environments. There are two much simpler solutions. The first is to locate caching/cloud servers as close as possible to the end users. Something that companies like Akamai and Google do already — at no charge to the carrier. Decreasing wireless distance from the wireless node is the other critical factor. This is why integrating WiFi with 3G/4G is so important.

A good example of a carrier that "gets it" is Free.FR in France. Free.FR is redefining what the idea of a carrier in the 21st century is, thanks to these innovations I have been talking about and pioneered by R&E networks like SURFnet. Integrating a blend of Wi-Fi, 3G and its all-fiber backbone, Free will offer unlimited voice, texting and data over the mobile networks. Free.fr deploys their own set-top box for automatically sharing a portion of one's broadband connection via Wi-Fi with other Free.fr customers. Over five million set-top boxes means Free.fr has a free Wi-Fi cloud covering major cities such as Paris. Even when away from home, you can easily get broadband instead of resorting to an expensive 3G network. Their set top box will also allow extreme local caching, to further enhance the user mobile experience. This is the future of broadband. Not silly gimmicks like TurboBoost or SpeedBoost.

Written by Bill St. Arnaud , Green IT Networking Consultant

But is Google doing the deal at least partly to give it leverage over wireless providers? I think so. The biggest threat to the growth of Smart Phones and tablets and other Google businesses like YouTube is the imposition of data caps and metered pricing by wireless providers like at&t and Verizon Wireless.

The providers would like to charge by the number of bytes transferred — similar to the way they charge for voice minutes today. Content providers (including Google) don't want an expensive impediment in the way of their content distribution. Providers of software and hardware for tablets, Smart Phones, and computers (including Google) don't want these devices to be less useful because content delivery to the devices is expensive. Not a moral issue here but a business one, although — in the long term — I think unlimited data plans lead to more growth for everyone (and proved that to my own satisfaction with the launch of AT&T WorldNet, which popularized all-you-can eat pricing way back in dialup days).

Today the handset manufacturers, with the exception of Apple, are at the mercy of the carriers, especially in the US where most phone are locked to the wireless network that subsidizes their initial purchase. If the manufacturer doesn't have a deal with Verizon or at&t, they can't get the volumes they need to be a serious player in the US market. iPhone as a must-have device for networks began to upset that balance of power; but Steve Jobs hasn't yet used Apple's muscle to build a US market for open iPads or iPhones which can run on any network given the right prepaid SIM card.

But Google is much more in the content business than Apple is — even given iTunes. Google has more to gain by stopping the spread of bandwidth caps and metered pricing before they become universal for wireless and spread to wireline as well. Google knows that the wireline providers, especially the cablecos who don't want their chokehold on content delivery loosened, would like nothing better than to move to metered pricing themselves.

A handset maker owned by Google can introduce a product without carrier backing and without the need to lock into any network. The product can be cheap to grab marketshare; the product can be subsidized through ads delivered rather than voice or data minutes sold. If the product is incredibly compelling as well, the major carriers will be forced to let it onto their networks as an open device. Customers who bought their phones from Googlerola will find it easy to switch between networks to get the best deal. Competition between carriers will then be based on service quality and pricing only; competitive pressures may well force them back to offering unlimited data. Google wins both as a content provider and as a client provider.

The announced at&t/t-mobile deal will, if approved, shift power to the carriers by eliminating a disruptive competitor and concentrating spectrum ownership. The Google/Motorola deal shifts the balance of power away from the carriers.

Dan Frommer speculates:

"If Google and Motorola can push the price of smartphones down even more, and if carriers can accelerate the uptake of mobile data plans, this could be good for them. But there's also the chance that Larry Page has a long list of wacky, disruptive ideas he wants to try, focused around handset distribution and pricing, ad subsidies, etc., which could take real leverage away from carriers. Their path toward dumb pipe status seems to be increasing by the deal. This will likely end up better for consumers but could be annoying for the carriers."

But it doesn't stop there. As Peter Kafka points out on All Things D, Motorola Mobility, the company that Google is proposing to buy, is the world's largest provider of set-top boxes. Suppose set-top boxes were not subsidized by or distributed through cable and satellite companies. Suppose they came from Googlerola and were so good at what they did and so cheap on the open market that the content distribution networks had to offer them without a specific lock to their content in order to stay in the broadband ISP business (even though they'd still be able to charge for content). That would be the end of any thought of metered pricing for wireline Internet service. Another threat to Google would be eliminated. More content opportunities would open up.

The acqusition be all about the patents as most people are saying and as Google broadly hinted; but, as Stacey Higginbotham and Katie Fehrenbacher writing on GIGAOM say: "if Google wants to use Android as a way into the home, Motorola's home automation, set-top box and broadband gear businesses now gives Google a platform from which to jump."

Written by Tom Evslin

Company further reports that currently, Real-Time Entertainment applications consume 49.2% of peak aggregate traffic, up from 29.5% in 2009 — a 60% increase [see figture below]. Sandvine forecasts that the Real-Time Entertainment category will represent 55-60% of peak aggregate traffic by the end of 2011.

Other findings include:

• In Latin America, Social Networking (overwhelmingly Facebook) is a bigger source of traffic than YouTube, representing almost 14% of network traffic. Real-Time Entertainment represents 27.5% of peak aggregate traffic, still the largest contributor of traffic in that region.

• In Europe, Real-Time Entertainment continues a steady climb, rising to 33.2% of peak aggregate traffic, up from 31.9% last fall. BitTorrent, a peer-to-peer (P2P) file sharing protocol, is the largest single component of both upstream (59.7%) and downstream (21.6%) Internet traffic during peak periods. In the UK, BBC's iPlayer is 6.6% of peak downstream traffic, reflecting the demand for localized content in many markets. Overall, individual subscribers in Europe consume twice the amount of data as North Americans.

Internationally, there are already a number of large Video-On-Demand (VoD) providers, including Netflix, Amazon, Wal-Mart and Apple, which introduced a rental streaming service via iTunes in early 2008.

A sign of the times came with the 2010 bankruptcy of Blockbuster, once one of the largest move rental companies. In April 2011 it won final approval to sell its assets to Dish Network Corp for $320 million. Blockbuster attributed its bankruptcy to the economic downturn and increasingly competitive environment in the US, via services from NetFlix and Coinstar's Redbox. At the time of bankruptcy, Blockbuster had 5,600 stores in operation.

The Blockbuster name is a marketing tool in itself however, as it has strong brand recognition attached to it. Dish Network hopes the acquisition of Blockbuster's assets will provide an opportunity to expand its services and cross-marketing initiatives while also complimenting its existing video offerings.

Other digital media players showing renewed interest in the VoD sector include the industry heavyweight, Google. It initially launched an online movie rental service in 2010 called YouTube Rental and in April 2011 it increased its competitive position by forming partnerships with large Hollywood studios Sony, Warner Bros and Universal.

Not to be undone, Facebook has entered the VoD market via a partnership with Warner Bros; signalling the beginning of merge between social networking and VoD services. By using Facebook credits, users can purchase a movie and watch it in their browser. Titles are available for both purchase and rent. Some points to note regarding the Facebook service include:

• Facebook users must allow the Warner Bros App access to limited personal information, just as with other apps.
• At this stage only Facebook credits can be used to purchase movies. While this system allows for international users to make purchases as it is not based on currency — it also limits consumers to those who are prepared to purchase credits.
• In the future the combination of using demographic data might be tied into the VoD service and prompt suggestions for other movies that consumers may like.

The Hollywood studios have long generated a large revenue stream from physical DVD rentals and it will be quite a task for online channels to make as much money. However the economics of online distribution seem to be improving and with DVD rental kiosks like Coinstar proving popular and services like Netflix gaining in popularity; it certainly appears that the writing is on the wall for traditional video outlets.

Written by Paul Budde, Managing Director of Paul Budde Communication

All the cable companies easily beat all the phone companies with the exception of Verizon where we're seeing a mix of DSL and FiOS results.

And just in case you believed the hype about 4G, notice that Clearwire's Clear service comes in below DSL.  There is no reason to believe LTE networks will do any better once they have customers, i.e. once they are carrying commercially viable levels of traffic.

Written by Brough Turner, Founder & CTO at netBlazr

1) Consumers pay Internet Service Providers ("ISPs") a monthly subscription with the expectation that the fee covers access to available content, i.e., the conduit. As the World Wide Web evolves and content options diversify to include full motion video, consumers simply expect their ISPs to make sure the download distribution pipes are sufficiently robust to handle high bandwidth requirements and commensurately large monthly download volume. Cable modem service agreements may have a cap on downloading per month, but consumers generally assume "All You Can Eat" access rights, plus the expectation that video streaming will work, i.e., no blurring, frozen frames, or blue screens.

2) Because upstream requests for content are narrowband and because the typical consumer downloads much more content than he or she uploads, ISPs serving end users, such as Comcast, typically will have a large traffic imbalance with more downstream traffic to deliver than upstream traffic that the end user serving ISP might want other ISPs, such as Level 3, to handle.

3) Until such time as Comcast's "Television Anywhere" takes off and generates lots more traffic that Comcast will need other ISPs to handle-whether on a peering or transit basis-Level 3 vastly contributes to Comcast's download "surplus" delivery burden to end users. Of course Level 3 replaces another content distribution network so the total volume of Comcast's downloading burden does not change in the short term. However, in the context of peering and transit between Comcast and Level 3, the traffic volume relationship changes with a greater imbalance resulting from the new Netflix traffic Level 3 now delivers to Comcast.

4) The Comcast- Level 3 dispute distills to a disagreement over whether and how much either should pay in light of changed traffic patterns. Because the parties already have traffic agreements, modification of terms might require additional payments from Level 3 to Comcast, absent Comcast's need for Level 3's upstream transmission services. Of course Comcast does need the services of Tier 1 ISPs like Level 3, but until Comcast starts distributing lots more of its cable television video product over the Web, Netflix downloading to Comcast subscribers will predominate.

5) Cooperative ISPs typically align inbound and outbound peering traffic with an eye toward creating a balance, but either or both ISPs might also want to expand transiting services as these paid arrangements are based on the unlikelihood of balanced traffic loads.  Digital Society Policy Director George Ou reports that Comcast and Level 3 have both peering and transit agreements. George lays blame on Level 3 for expecting Comcast to absorb the newly increased volume of traffic delivered to it by Level 3 without additional payment by Level 3, or the offer of additional free upstream capacity.

Reasonable people can disagree as to the mutual exclusivity or substitutability of peering versus transit. George considers the two types of traffic arrangements mutually exclusive and has chided me for thinking that the parties could recalibrate both to mitigate the traffic imbalance if they wanted to (read more).

The Comcast- Level 3 dispute confirms that there is no such thing as a free lunch. It also highlights disagreement over who has to pay when consumers' download requirements increase with full motion video access. George considers it a nonstarter for Comcast to raise end users cable modem rates, despite a vast increase in the value proposition created by IPTV.  Some economists consider it a given that Comcast has the "right" to demand compensation from both sides of its market position, upstream from Level 3-and possibly the real instigators of greater bandwidth requirements Netflix and Google-and also downstream from end users, i.e., cable modem subscribers, co-conspirators with Netflix and Google.

Bottom line: one or more players in the Internet "network of networks" will have to pay for greater capacity. Early on in the Internet's development, avoiding payment strategies were depicted as "hot potato routing." Carriers unwilling to upgrade facilities to accommodate greater demand sought to hand off traffic as soon as possible. Level 3 has no such option of passing the packets off to several different carriers for the last mile to end users. Comcast knows this and true to form the company exploits its position to the fullest extent possible.

Written by Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law