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Net Neutrality: Where The Money Goes

As we all know, Google and Verizon have reached a private agreement to for Google to pay for priority shipping of its bits over Verizon's networks. Both companies are getting beat up for that agreement. Google is getting beat up because they have long been proponents for net neutrality and have turned their back on the wireless side. Verizon is getting beat up because they are Verizon. But the pernicious FUD that is spread about Net Neutrality is appalling. It started long before October 2009, when the FCC rules were proposed, and hasn't stopped since. Net Neutrality doesn't stop providers from doing business. It does attempt to stop them from doing business unfairly.

Henry Blodget at Business Insider writes in "Stop Moaning About 'NET NEUTRALITY' -- Of Course ISPs Should Be Able To Charge Higher Rates For Premium Traffic," that Verizon should be allowed to do so. Blodget's argument that service providers build their own networks and should be able to use them as they see fit is misguided. Let's follow the money. I pay Verizon for my Internet access (I am both a FiOS and a wireless customer). For that fee, I get a certain amount of bandwidth to the Internet. I understand that Verizon can't guarantee the amount bandwidth that I receive--I even understand the technical reasons why they can't--but I pay for access. Google, or any content provider, also pays for their Internet access to one or more service providers. Their deal is rather different than mine; they get service level agreements and guarantees, and they pay more for it. Still, we are all paying for access at the edge of the Internet. Update: Greg Knierieman pointed me to a 2009 Wired article "YouTube's Bandwidth Bill Is Zero. Welcome to the New Net"  that indicates Google bandwidth costs may be zero due to peering relationships. If that is the case, then they are paying in kind.

I pay less than Google because I use less bandwidth. Google pays more than me because they use more bandwidth. Hey, that looks like consumption-based pricing, don't it? If I really wanted to get my shorts in a bunch, I'd point out that both Google and I pay for that bandwidth whether we use it or not. The point is, everyone pays to transport bits from here to there, right? Yes and no.

The Internet is just an interconnected network of networks. Even though I connect to Verizon, and Google connects to Level 3, if I trace a route from my home to Google.com, I end up at a host on AOL after traversing Verizon, Level 3, and then Google's own network. Through a series of acquisition in the 90's and 00's, Alternet is part of Verizon. So Verizon gets paid by me to carry traffic and Level 3 gets paid by Google to carry traffic. There are no middle men because Google is richly connected to the Internet. But if I go to a less well connected site, then a provider in the middle, say XO Communications, isn't being paid by me or the content provider.

XO isn't carrying that traffic for free out of the goodness of their hearts. XO is likely being paid by the downstream provider to transport traffic across XO's network, and depending on XO's relationship with Verizon, they are paying to transport or have a peering relationship in place. Ars Technica has a good intro to peering and transit in "How the 'Net works: an introduction to peering and transit," but I'll summarize. When two ISPs have a transit arrangement, one pays the other for access just like you and I do. When ISPs have a peering relationship, they agree to carry each others' traffic for free, the assumption being that peering is a fair and equitable exchange. In 2008, Cogent and Sprint disagreed on a peering agreement because the exchange between them was inequitable, and Sprint cut the peering relationship, which was then resumed a few days later.  

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