Parties Debate FCC IP Interconnection Role, Industry Arrangements

The commission recognized telco and cable ISPs have “gatekeeper” power, said Joe Cavender, Level 3 vice president-federal affairs. The ISPs have the ability and incentive to take business advantage of their broadband networks connecting consumers to the Internet, he said. Cavender defended the 2015 order that reclassified broadband under Title II of the Communications Act, established net neutrality rules, and brought broadband ISP interconnection under case-by-case, complaint-driven Title II oversight. He said the FCC isn't regulating the Internet “end-to-end” but ensuring ISPs don’t abuse their local control to harm consumers or competition.

The actions were largely “based on theory,” not actual market problems, said Jeff Lanning, CenturyLink vice president-federal regulatory affairs. He noted CenturyLink is challenging the order, though its interconnection concerns are less than those it had about other parts of the order. Given Internet uncertainties, he said, a case-by-case approach is better than rules.

Consumer and market harms weren't speculative, said OTI Senior Counsel Sarah Morris. Before the order, interconnection disputes happened, she said, with Cogent (see 1602250052) suffering the most traffic congestion and degradation. That led to prolonged periods when consumers suffered from slow connections, no matter what speed tiers they had -- people paying for 50 Mbps were getting 4 Mbps, she said. “Nobody was doing anything about it,” she said, but now parties have recourse after the FCC’s assertion of interconnection authority.

The FCC erred in subjecting small ISPs to the interconnection regime, said Ross Lieberman, senior vice president-government affairs for ACA, with members that are small cable companies and telcos, many with fewer than 1,000 customers. He said the "one-size-fits-all" approach makes no sense for small ISPs lacking market power. ACA members don’t have the size and scope to enter into payment-free “peering” arrangements, but instead must pay larger carriers for “transit” that delivers traffic to and from the rest of the Internet, he said. If ACA members tried to block traffic as a negotiating tactic, “We’d be laughed at,” he said.

Interconnection payment questions can be thorny, the speakers said. “Transport networks cost a lot of money” and the traffic volume is growing rapidly, said Lanning, who said CenturyLink is constantly reinvesting in its network to increase capacity. “Port augmentation” is one cost, but distance and traffic flows are also important considerations, he said. Payment-free peering may be reasonable in one location, but not another if a party is simply trying to avoid transit fees, he said. “The costs are enormous," Lieberman agreed, and volume is increasing “exponentially.”

Cavender said Level 3 believes each carrier should pay for its own costs, with some cost sharing for interconnection, including through alternating “cross-connects.” Interconnection location is a key question, he agreed, and Level 3 is often willing to bring traffic to where other carriers want it, but wouldn't pay “tolls” for “arbitrary costs,” he said. Morris said OTI understood the need to pay for upgrades, but is concerned about "tolls" and "crazy costs.”

Internet payment arrangements reflect much more than the direct costs of interconnecting networks at any given location, said Philip Bowie, AT&T executive director-regulatory policy and planning, who spoke on an earlier panel. There is no “free” interconnection even if payments aren't exchanged, just “barter” peering arrangements in which each side pays the other through the service it provides, he said. When AT&T interconnects with other carriers in Dallas, for instance, it’s not just exchanging traffic in that location, but effectively connecting its counterparts to customers all over Texas, including El Paso, which is more than 600 miles away, he said. That service entails costs, he said.

Carriers are willing to engage in payment-free traffic exchanges with “peers” because they value each other’s service roughly equally, Bowie said. Carriers have peering policies to ensure equitable arrangements, which he said can include criteria on interconnection locations and bandwidth, geographic scope, and traffic volumes and balance. The latter has been particularly controversial, he said, because data-heavy one-way video streams create imbalances. Different companies have different standards, with AT&T requiring traffic flows to stay within a 2:1 ratio, he said. Carriers that don’t meet the criteria generally have to pay other carriers transit charges to deliver traffic, but those fees have been declining, he said. (Some enter into “paid peering” to gain access to another carrier’s customers, but not its peering arrangements.)

The market is changing as smaller carriers peer with each other to bypass the large “tier 1” carriers and their transit fees, said Jon Peha, Carnegie Mellon University engineering professor. Content distribution networks are being used to store content in servers closer to customers and reduce transit costs, and some application providers are building their own broader networks, with Google the prime example, he said. Costs to upgrade interconnection capacity are subject to negotiation, with questions of market power lurking, he said.

The shift from voice to broadband/IP networks challenges the entire industry, speakers said. With voice service declining in market importance, it makes less and less sense to maintain traditional phone networks, Bowie said. Making the change will take time and effort to figure out all the technical details, he said. Lanning said industry is in the process of overbuilding and replacing the old network, which is "dying." That process is complicated by Internet "latency" issues, jurisdictional issues and public mandates, such as on 911, electronic surveillance and cybersecurity, he said.