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Federal Internet Law & Policy
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OI Interconnection
 Dont be a FOOL; The Law is Not DIY

2015 OI Order Summary

"Interconnection.  BIAS involves the exchange of traffic between a broadband Internet access provider and connecting networks.  The representation to retail customers that they will be able to reach “all or substantially all Internet endpoints” necessarily includes the promise to make the interconnection arrangements necessary to allow that access. 

"As discussed below, we find that broadband Internet access service is a “telecommunications service” and subject to sections 201, 202, and 208 (along with key enforcement provisions).  As a result, commercial arrangements for the exchange of traffic with a broadband Internet access provider are within the scope of Title II, and the Commission will be available to hear disputes raised under sections 201 and 202 on a case-by-case basis: an appropriate vehicle for enforcement where disputes are primarily over commercial terms and that involve some very large corporations, including companies like transit providers and Content Delivery Networks (CDNs), that act on behalf of smaller edge providers.

"But this Order does not apply the open Internet rules to interconnection.  Three factors are critical in informing this approach to interconnection.  First, the nature of Internet traffic, driven by massive consumption of video, has challenged traditional arrangements—placing more emphasis on the use of CDNs or even direct connections between content providers (like Netflix or Google) and last-mile broadband providers.  Second, it is clear that consumers have been subject to degradation resulting from commercial disagreements, perhaps most notably in a series of disputes between Netflix and large last-mile broadband providers.  But, third, the causes of past disruption and—just as importantly—the potential for future degradation through interconnection disputes—are reflected in very different narratives in the record.

"While we have more than a decade’s worth of experience with last-mile practices, we lack a similar depth of background in the Internet traffic exchange context.  Thus, we find that the best approach is to watch, learn, and act as required, but not intervene now, especially not with prescriptive rules.  This Order—for the first time—provides authority to consider claims involving interconnection, a process that is sure to bring greater understanding to the Commission.

OI Order 2015, paras 28-31.

2015 OI Order Para

194. In the 2010 Open Internet Order, the Commission applied its open Internet rules “only as far as the limits of a broadband provider’s control over the transmission of data to or from its broadband customers,” and excluded the exchange of traffic between networks from the scope of the rules. In the 2014 Open Internet NPRM, the Commission tentatively concluded that it should maintain this approach, but explicitly sought comment on suggestions that the Commission should expand the scope of the open Internet rules to cover issues related to Internet traffic exchange.

195. As discussed below, we classify fixed and mobile broadband Internet access service as telecommunications services. The definition for broadband Internet access service includes the exchange of Internet traffic by an edge provider or an intermediary with the broadband provider’s network. We note that anticompetitive and discriminatory practices in this portion of broadband Internet access service can have a deleterious effect on the open Internet, and therefore retain targeted authority to protect against such practices through sections 201, 202, and 208 of the Act (and related enforcement provisions), but will forbear from a majority of the other provisions of the Act. Thus, we conclude that, at this time, application of the no-unreasonable interference/disadvantage standard and the prohibitions on blocking, throttling, and paid prioritization to the Internet traffic exchange arrangements is not warranted. 

196. Since broadband Internet access service providers cannot, on their own, connect to every end point on the Internet in order to provide full Internet access to their customers, they historically paid third-party backbone service providers for transit. Backbone service providers interconnected upstream until traffic reached Tier 1 backbone service providers, which peered with each other and thereby provided their customer networks with access to the full Internet. In this hierarchical arrangement of networks, broadband Internet access providers negotiated with backbone service providers; broadband Internet access providers generally did not negotiate with edge providers to gain access to content. However, in recent years, new business models of Internet traffic exchange have emerged, premised on changes in traffic flows and in broadband Internet access provider networks. A number of factors drive these trends in Internet traffic exchange.

197. Critically, the growth of online streaming video services has sparked further evolution of the Internet. Content providers have come to rely on the services of commercial and private CDNs, which cache content close to end users, providing increased quality of service and avoiding transit costs. While CDNs rely on transit to feed the array of CDN cache servers, they deliver traffic to broadband Internet access service providers via transit service or by entering into peering arrangements, directly interconnecting with broadband Internet access service providers.

198. In addition, several large broadband Internet access service providers, such as AT&T, Comcast, Time Warner Cable, and Verizon, have built or purchased their own backbones, giving them the ability to directly interconnect with other networks and edge providers and thereby lowering and eliminating payments to third-party transit providers. These interconnection arrangements are “peering,” involving the exchange of traffic only between the two networks and their customers, rather than paid transit, which provides access to the full Internet over a single interconnection. Peering gives the participants greater control over their traffic and any issues arising with the traffic exchange are limited to those parties, and not other parties over other interconnection links. Historically, broadband Internet access service providers paid for transit and therefore had an incentive to agree to settlement-free peering with a CDN to reduce transit costs; however, where large broadband Internet access service providers have their own national backbones and have settlement-free peering with other backbones, they may no longer have an incentive to agree to settlement-free peering with CDNs in order to avoid transit costs. As shown below in Chart 1, the evolution from reliance on transit to peering arrangements also means an evolution from a traffic exchange arrangement that provides access to the full Internet to a traffic exchange arrangement that only provides for the exchange of traffic from a specific network provider and its customers.

199. Recent Disputes. Recently, Internet traffic exchange disputes have reportedly involved not de-peering, as was more frequently the case in the last decade, but rather degraded experiences caused by congested ports between providers. In addition, these disputes have evolved from conflicts that may last a few days, to disputes that have been sustained for well over a year, and have gone from disputes between backbone service networks, to disputes between providers of broadband Internet access service and transit service providers, CDNs, or edge providers. The typical dispute has involved, on one side, a large broadband provider, and on the other side, a commercial transit provider (such as Cogent or Level 3) and/or a large CDN. Multiple parties point out, however, that interconnection problems can harm more than just the parties in a dispute. When links are congested and capacity is not augmented, the networks—and applications, large and small, running over the congested links into and out of those networks—experience degraded quality of service due to reduced throughput, increased packet loss, increased delay, and increased jitter. At the end of the day, consumers bear the harm when they experience degraded access to the applications and services of their choosing due to a dispute between a large broadband provider and an interconnecting party. Parties also assert that these disputes raise concerns about public safety and network reliability. To address these growing concerns, a number of parties have called for extending the rules proposed in the 2014 Open Internet NPRM to Internet traffic exchange practices.

200. The record reflects competing narratives. Some edge and transit providers assert that large broadband Internet access service providers are creating artificial congestion by refusing to upgrade interconnection capacity at their network entrance points for settlement-free peers or CDNs, thus forcing edge providers and CDNs to agree to paid peering arrangements. These parties suggest that paid arrangements resulting from artificially congested interconnection ports at the broadband Internet access service provider network edge could create the same consumer harms as paid arrangements in the last-mile, and lead to paid prioritization, fast lanes, degradation of consumer connections, and ultimately, stifling of innovation by edge providers. Further, edge providers argue that they are covering the costs of carrying this traffic through the network, bringing it to the gateway of the Internet access service, unlike in the past where both parties covered their own costs to reach the Tier 1 backbones where traffic would then be exchanged on a settlement-free basis. Edge and transit providers argue that the costs of adding interconnection capacity or directly connecting with edge providers are de minimis. Further, they assert that traffic ratios “are arbitrarily set and enforced and are not reflective of how [broadband providers] sell broadband connections and how consumers use them.” Thus, these edge and transit providers assert that a focus on only the last-mile portion of the Internet traffic path will fail to adequately constrain the potential for anticompetitive behavior on the part of broadband Internet access service providers that serve as gatekeepers to the edge providers, transit providers, and CDNs seeking to deliver Internet traffic to the broadband providers’ end users.

201. In contrast, large broadband Internet access service providers assert that edge providers such as Netflix are imposing a cost on broadband Internet access service providers who must constantly upgrade infrastructure to keep up with the demand. Large broadband Internet access service providers explain that when an edge provider sends extremely large volumes of traffic to a broadband Internet access service provider— e.g., through a CDN or a third-party transit service provider—the broadband provider must invest in additional interconnection capacity (e.g., new routers or ports on existing routers) and middle-mile transport capacity in order to accommodate that traffic, exclusive of “last-mile” costs from the broadband Internet access provider’s central offices, head ends, or cell sites to end-user locations. Commenters assert that if the broadband Internet access service provider absorbs these interconnection and transport costs, all of the broadband provider’s subscribers will see their bills rise. They argue that this is unfair to subscribers who do not use the services, like Netflix, that are driving the need for additional capacity. Broadband Internet access service providers explain that settlement-free peering fundamentally is a barter arrangement in which each side receives something of value. These parties contend that if the other party is only sending traffic, it is not contributing something of value to the broadband Internet access service provider.

202. Mechanism to Resolve Traffic Exchange Disputes. As discussed, Internet traffic exchange agreements have historically been and will continue to be commercially negotiated. We do not believe that it is appropriate or necessary to subject arrangements for Internet traffic exchange (which are subsumed within broadband Internet access service) to the rules we adopt today. We conclude that it would be premature to adopt prescriptive rules to address any problems that have arisen or may arise. It is also premature to draw policy conclusions concerning new paid Internet traffic exchange arrangements between broadband Internet access service providers and edge providers, CDNs, or backbone services. While the substantial experience the Commission has had over the last decade with “last-mile” conduct gives us the understanding necessary to craft specific rules based on assessments of potential harms, we lack that background in practices addressing Internet traffic exchange. For this reason, we adopt a case-by-case approach, which will provide the Commission with greater experience. Thus, we will continue to monitor traffic exchange and developments in this market.

203. At this time, we believe that a case-by-case approach is appropriate regarding Internet traffic exchange arrangements between broadband Internet access service providers and edge providers or intermediaries—an area that historically has functioned without significant Commission oversight. Given the constantly evolving market for Internet traffic exchange, we conclude that at this time it would be difficult to predict what new arrangements will arise to serve consumers’ and edge providers’ needs going forward, as usage patterns, content offerings, and capacity requirements continue to evolve. Thus, we will rely on the regulatory backstop prohibiting common carriers from engaging in unjust and unreasonable practices. Our “light touch” approach does not directly regulate interconnection practices. Of course, this regulatory backstop is not a substitute for robust competition. The Commission’s regulatory and enforcement oversight, including over common carriers, is complementary to vigorous antitrust enforcement. Indeed, mobile voice services have long been subject to Title II’s just and reasonable standard and both the Commission and the Antitrust Division of the Department of Justice have repeatedly reviewed mergers in the wireless industry. Thus, it will remain essential for the Commission, as well as the Department of Justice, to continue to carefully monitor, review, and where appropriate, take action against any anti-competitive mergers, acquisitions, agreements or conduct, including where broadband Internet access services are concerned.

204. Broadband Internet access service involves the exchange of traffic between a last-mile broadband provider and connecting networks. The representation to retail customers that they will be able to reach “all or substantially all Internet endpoints” necessarily includes the promise to make the interconnection arrangements necessary to allow that access. As a telecommunications service, broadband Internet access service implicitly includes an assertion that the broadband provider will make just and reasonable efforts to transmit and deliver its customers’ traffic to and from “all or substantially all Internet endpoints” under sections 201 and 202 of the Act. In any event, BIAS provider practices with respect to such arrangements are plainly “for and in connection with” the BIAS service. Thus, disputes involving a provider of broadband Internet access service regarding Internet traffic exchange arrangements that interfere with the delivery of a broadband Internet access service end user’s traffic are subject to our authority under Title II of the Act.

See Related Mergers

During this time frame, significant mergers were pending which had interconnection as issues:

After these mergers and the release of the OI rules, Charter announced that it would seek to acquire TWC.

Remarks of Jon Sallet, Federal Communications Commission General Counsel As Prepared for Delivery Telecommunications Policy Research Conference: “The Federal Communications Commission and Lessons of Recent Mergers & Acquisitions Reviews” 

OI 2014 NPRM

59. Internet Traffic Exchange.  The Open Internet Order explained that its rules did not apply beyond “the limits of a broadband provider’s control over the transmission of data to or from its broadband customers.”132 In other words, the Order applied to a broadband provider’s use of its own network but did not apply the no-blocking or unreasonable discrimination rules to the exchange of traffic between networks, whether peering, paid peering, content delivery network (CDN) connection, or any other form of inter-network transmission of data, as well as provider-owned facilities that are dedicated solely to such interconnection. Thus, the Order noted that the rules were not intended “to affect existing arrangements for network interconnection, including existing paid peering arrangements.”  We tentatively conclude that we should maintain this approach, but seek comment on whether we should change our conclusion.  Some commenters have suggested that we should expand the scope of the open Internet rules to cover issues related to traffic exchange.  We seek comment on these suggestions.  For example, how can we ensure that a broadband provider would not be able to evade our open Internet rules by engaging in traffic exchange practices that would be outside the scope of the rules as proposed? - May 2014 Open Internet NPRM

FCC Chairman Wheeler 2014 Inquiry

At the 2014 State of the Internet conference, FCC Chairman Wheeler reportedly indicated that the FCC would be paying attention to Internet interconnection.

"A lot of people seem to think that peering and network neutrality are the same issue. It is not... I think it is an issue that the Commission needs to stay on top of. It is an issue that the Commission invites comments and stories. Our job is to ensure that whatever happens is not anti competitive. Is not favoring one party.... And that's the challenge that we have to apply, to ensure that it is a competitive, vibrant, non preferential market."

June 16, 2014 STATEMENT BY FCC CHAIRMAN TOM WHEELER ON BROADBAND CONSUMERS AND INTERNET CONGESTION.  STMT.  OCHTW pdf Word TXT 

“For some time now we have been talking about protecting Internet consumers. At the heart of this is whether Internet Service Providers (ISPs) that provide connectivity in the final mile to the home can advantage or disadvantage content providers, and therefore advantage or disadvantage consumers. What we call the Open Internet rule on which we are currently seeking comment is one component of this. If adopted, the new rule would prohibit bad acts such as blocking content or degrading access to content. This kind of activity within an ISP’s network has traditionally been the focus of net neutrality. But there is another area of Internet access, and that is the exchange of traffic between ISPs and other networks and services. The recent disputes between Netflix and ISPs such as Comcast and Verizon have highlighted this issue.

“In reading the emails I receive, I thought this one from George pretty well sums up public concern: Netflix versus Verizon: Is Verizon abusing Net Neutrality and causing Netflix picture quality to be degraded by “throttling” transmission speeds? Who is at fault here? The consumer is the one suffering! What can you do?

“We don’t know the answers and we are not suggesting that any company is at fault. But George has gone to the heart of the matter: what is going on and what can the FCC do on behalf of consumers? Consumers pay their ISP and they pay content providers like Hulu, Netflix or Amazon. Then when they don’t get good service they wonder what is going on. I have experienced these problems myself and know how exasperating it can be.

“Consumers must get what they pay for. As the consumer’s representative we need to know what is going on. I have therefore directed the Commission staff to obtain the information we need to understand precisely what is happening in order to understand whether consumers are being harmed. Recently, at my direction, Commission staff has begun requesting information from ISPs and content providers. We have received the agreements between Comcast and Netflix and Verizon and Netflix. We are currently in the process of asking for others.

“To be clear, what we are doing right now is collecting information, not regulating. We are looking under the hood. Consumers want transparency. They want answers. And so do I.....

OI Rules 2010

The FCC's 2010 Open Internet rules applied to Broadband Internet Access Services. The FCC excluded Internet Backbone Services from the definition of Broadband Internet Access Services.

47. ...Nor does broadband Internet access service include virtual private network services, content delivery network services, multichannel video programming services, hosting or data storage services, or Internet backbone services (if those services are separate from broadband Internet access service).  These services typically are not mass market services and/or do not provide the capability to transmit data to and receive data from all or substantially all Internet endpoints.

67 n. 209: "We do not intend our rules to affect existing arrangements for network interconnection, including existing paid peering arrangements."

Ch. Genachowski testified before Congress that the Open Internet rules did not apply to the Comcast / Level 3 Internet interconnection dispute.


Starting at minute 1:51
  • February 16, 2011, House Commerce Committee, Subcommittee on Communications and Technology, Network Neutrality and Internet Regulation: Warranted or More Economic Harm than Good? (Level3/Comcast Peering Dispute was raised as an issue)
    • Preliminary Transcript pdf
    • Mrs. {Blackburn.} Excellent. Thank you. Okay. Let us talk about peering and interconnectivity. We know that these arrangements have never been regulated, and the FCC net neutrality order says that the rules do not cover peering. So Mr. Chairman, do you believe the Commission's new net neutrality order and its underlying rules govern the level 3 Comcast dispute?
    • Mr. {Genachowski.} Well, you said the order says that it doesn't change anything with respect to existing peering arrangements. It applies to Internet access service provided to consumers and small businesses. You are referring to a dispute that is occurring outside the Commission, a commercial dispute. I hope those parties settle it and resolve it but it is not something that we have facts and data on. I do think the order speaks for itself in the way that you suggest.
    • Mrs. {Blackburn.} All right. Commissioner McDowell, do you believe the FCC has the authority it is claim to govern interconnectivity agreements?
    • Mr. {McDowell.} Peering?
    • Mrs. {Blackburn.} Yes.
    • Mr. {McDowell.} No, ma'am.

Enforcement / Complaints


 

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