Level 3’s global network: Orange lines represent Level 3-owned infrastructure, yellow lines show leased or co-owned connections.

Five of the largest Internet Service Providers in the country are intentionally sabotaging your use of the Internet by allowing their network connections to degrade unless they receive extra compensation from content companies they often directly compete with.

Mark Taylor, vice president of content and media for Level 3, wrote a lengthy primer on how Internet providers exchange traffic with each other across a vast global network. While clients of Level 3 are likely to have few problems exchanging traffic back and forth across Level 3’s global network, vital interconnections with other providers that make sure everyone can communicate with everyone else on the Internet are occasional trouble spots.

Every provider has different options to reach other providers, but favor those offering the most direct route possible to minimize “hops” between networks, which slow down the connection and increase the risk of service interruptions. These connections are often arranged through peering agreements. Level 3 has 51 peers, minimized in number to keep traffic moving as efficiently as possible.

This oversaturated port in Dallas cannot handle all the traffic trying to pass through it, so Internet packets are often dropped and traffic speeds are slowed.

Taylor writes most peering arrangements were informal agreements between engineers and did not involve any money changing hands. Today, 48 of the 51 Level 3 peering agreements don’t involve compensation. In fact, Level 3 refuses to pay “arbitrary charges to add interconnection capacity.” Taylor feels such upgrades are a matter of routine and are not costly for either party.

Peering agreements have been a very successful part of the Internet experience, even if end users remain completely in the dark about how Internet traffic moves around the world. In the view of many, customers don’t need to know and shouldn’t care, because their monthly Internet bill more than covers the cost of transporting data back and forth.

Because of ongoing upgrades the average utilization of Level 3’s connections is around 36 percent of capacity — busy enough to justify keeping the connection and providing spare capacity for days when Internet traffic explodes during breaking news or over the holidays.

However, Taylor says more than a year ago, something suddenly changed at five U.S. Internet Service Providers. They stopped periodic upgrades and allowed some of their connections to become increasingly busy with traffic. Today, six of Level 3’s 51 peer connections are now 90 percent saturated with traffic for several hours a day, which causes traffic to degrade or get lost.

“[The] congestion [has become] permanent, has been in place for well over a year and […] our peer refuses to augment capacity,” Taylor wrote. “They are deliberately harming the service they deliver to their paying customers. They are not allowing us to fulfill the requests their customers make for content.”

Taylor adds all but one of the affected connections are U.S. consumer broadband networks with a dominant or exclusive market share. Where competition exists, no provider allows their Internet connections to degrade, said Taylor.

Taylor won’t directly name the offenders, but he left an easy-to-follow trail:

“The companies with the congested peering interconnects also happen to rank dead last in customer satisfaction across all industries in the U.S.,” Taylor wrote. “Not only dead last, but by a massive statistical margin of almost three standard deviations.”

Taylor footnotes the source for his rankings, the American Consumer Satisfaction Index. The five worse providers listed for consumer satisfaction:

• Comcast
• Time Warner Cable
• Charter Communications
• Cox Communications
• Verizon

AT&T has also made noises about insisting on compensation for its own network upgrades, blaming Netflix traffic.

In fact, Netflix traffic seems to be a common point of contention among Internet Service Providers that also sell their own television packages. They now insist the streaming video provider establish direct, paid connections with their networks. Level 3 is affected because it carries a substantial amount of traffic on behalf of Netflix.

Ultimately, the debate is about who pays for network upgrades to keep up with traffic growth. Taylor says Level 3’s cost to add an extra 10Gbps port would be between $10-20 thousand dollars, spare change for multi-billion dollar Americans cable and phone companies. Normally, competition would never allow a traffic dispute like this interfere with a customer’s usage experience. Angry customers would simply switch providers. But the lack of competition prevents this from happening in the United States, leaving customers in the middle.

This leaves Taylor with a question: “Shouldn’t a broadband consumer network with near monopoly control over their customers be expected, if not obligated, to deliver a better experience than this?”

Paul

Three important Republican lawmakers have announced their support of Comcast’s $45 billion acquisition of Time Warner Cable, claiming the combined entity will not affect competition in the cable or broadband market.

Sens. Rand Paul of Kentucky, Lindsay Graham of South Carolina, and Rep. Blake Farenthold of Texas told Newsmax TV’s Steve Malzberg the cable merger does not seem to be a monopoly.

“One of the good things about the Internet … is there’s such of diversity of opinion and so many places to get opinion that all the old-fashioned rules on merger and acquisitions in media really have become outdated,” Paul said. “[There are] so many places to look for a viewpoint … [so] I’m just not much on having the government get involved. Most of the time the government gets involved because another competitor doesn’t like it and that competitor is usually an enormous competitor…. So for the most part, I would let [these] mergers occur.”

Graham

South Carolina’s Lindsay Graham agreed with Paul. Despite the fact South Carolina is now dominated by Comcast and Time Warner Cable, turning the two companies into one does not pose any problem for Graham.

“There’s no competition between Time Warner and Comcast in a cable market, so you’re not creating a monopoly,” Graham said. “There’s competition with satellite, with phone companies, with all kind of things.”

Farenthold expressed concern about “left-leaning” Comcast, owner of NBC and MSNBC, getting larger but cannot oppose the merger on those grounds alone.

Farenthold

“You can’t not approve a merger because you don’t like the companies’ politics. That’s just not right,” Farenthold told Newsmax. “The issue is, is it going to create a monopoly? Well, Time Warner and Comcast don’t compete in any markets or maybe very few markets.”

Two of the lawmakers received contributions from Comcast’s political action committee:

• Graham: $13,500
• Farenthold: $2,000

LUS Fiber is Lafayette, La., municipal broadband provider.

During remarks at the National Cable Show in Los Angeles, FCC chairman Thomas Wheeler promised he would stimulate more broadband competition by overriding state laws that presently restrict or ban municipal broadband networks.

“One place where it may be possible is municipally owned or authorized broadband systems. I understand that the experience with community broadband is mixed, that there have been both successes and failures. But if municipal governments—the same ones that granted cable franchises—want to pursue it, they shouldn’t be inhibited by state laws. I have said before, that I believe the FCC has the power – and I intend to exercise that power – to preempt state laws that ban competition from community broadband.”

After making the remarks, a debate has emerged over the exact definition of “preempt.” With at least 20 states limiting or banning community-owned broadband networks, the FCC would have to overturn or invalidate the state laws to render them moot.

At least one judge — Laurence Silberman — believes the FCC has the authority to take “measures that promote competition in the local telecommunications market or other regulating methods that remove barriers to infrastructure investment.” In a footnote, Silberman wrote that “[a]n example of a paradigmatic barrier to infrastructure investment would be state laws that prohibit municipalities from creating their own broadband infrastructure to compete against private companies.”

A FCC spokesperson, in response to inquiries about Wheeler’s remarks, was less conclusive.

“It’s too early to say how [Wheeler] will address existing state laws,” said the spokesperson.

That leaves open the question about whether the FCC intends to cancel existing state laws or simply prohibit new ones from being enacted. That distinction could make a tremendous difference in states like North Carolina, where a fierce battle over protecting municipal broadband was lost when Republicans took control of the state government. Telecom lobbyists, often working under the auspices of the American Legislative Exchange Council (ALEC) have either directly banned municipal broadband networks from getting off the ground or placed so many restrictions on service to make projects untenable.

The Consumerist points out in Pennsylvania, municipal broadband is only allowed in communities if a telephone company does not provide any type of broadband to anyone in their service area. In Nevada, only towns with fewer than 25,000 people or counties with 50,000 can host community-owned broadband networks — numbers likely too low to sustain such a venture financially.

AT&T has approached DirecTV about a possible acquisition of the satellite provider in a deal expected to fetch at least $40 billion, spare change for AT&T’s $185 billion operation.

The Wall Street Journal reports the deal would combine DirecTV’s 20 million customers with AT&T’s 5.7 million U-verse customers, rivaling the size of a combined Comcast and Time Warner Cable.

The idea for the merger came after Comcast and Time Warner Cable struck their deal in February, and a person familiar with the merger talks reports DirecTV is receptive to a deal with AT&T. AT&T CEO Randall Stephenson reportedly saw the next wave of consolidation in the American cable market as a potential game-changer, forcing AT&T to refocus its growth priorities back towards the United States instead of Europe.

Satellite companies like Dish and DirecTV are at an increasing disadvantage because growth in television subscriptions has stalled. Neither satellite company has a competitive broadband offering, and as more Americans gain access to wired broadband, many choose to bundle service with the company that provides Internet access.

DirecTV’s growth has fallen every year since 2010 and starting in 2013, the company began losing more subscribers than it signed up.

A combined AT&T-DirecTV would market satellite television nationwide, U-verse TV and Internet where available, wireless phone and broadband service, and rural satellite Internet access.

AT&T has explored an acquisition of a satellite provider for more than a decade and already partners with DirecTV to sell AT&T landline customers a bundle including the satellite provider’s television service.

As with most significant acquisitions proposed by AT&T, the Justice Department and the Federal Communications Commission will likely scrutinize any merger deal carefully. Both companies must prove the deal is in the public interest. But the Journal reports the FCC might be amenable to the deal because it considers satellite television without broadband a threatened business. Lobbyists are likely to argue the joint company would be the best positioned to compete effectively with a combined Comcast-Time Warner Cable.

If a deal appears likely, Dish Network is expected to face immediate pressure to also merge with an existing cable or telephone company.

Another alternative attempted in the past was a direct merger between DirecTV and Dish, an idea regulators nixed more than a decade ago. Today, such a deal would not solve either company’s difficulty providing broadband service.

Consumer groups are likely to oppose the merger because it further consolidates an industry they believe already sorely lacks competition. AT&T’s lawyers are reportedly already laying the foundation for a major lobbying campaign to promote the deal.

[flv]http://www.phillipdampier.com/video/WSJ ATT Approaches DirecTV for Merger 5-1-14.flv[/flv]

The Wall Street Journal provides more insight into the proposed merger of AT&T and DirecTV and how government regulators are likely to see the deal. (2:51)

Neville Chamberlain, British Prime Minister, 1937-1940

“If you don’t succeed, try, try, try again.” — Neville Chamberlain, 1938

Another day, another damage control effort from FCC chairman Thomas Wheeler, still reeling from days of criticism in response to his plan to revisit the issue of Net Neutrality next month.

In a lengthy blog post, Wheeler still believes it’s all a big misunderstanding:

“Some recent commentary has had a misinformed interpretation of the Open Internet Notice of Proposed Rulemaking (NPRM) currently before the Commission,” writes Wheeler. “There are two things that are important to understand.  First, this is not a final decision by the Commission but rather a formal request for input on a proposal as well as a set of related questions.  Second, as the Notice makes clear, all options for protecting and promoting an Open Internet are on the table.”

Except they are not.

Wheeler channels former British Prime Minister Neville Chamberlain by declaring a deep desire for “peace in our time” with half-measures instead of direct confrontation with Big Telecom interests.

“I believe this process will put us on track to have tough, enforceable Open Internet rules on the books in an expeditious manner, ending a decade of uncertainty and litigation,” Wheeler declares. “The idea of Net Neutrality (or the Open Internet) has been discussed for a decade with no lasting results. Today Internet Openness is being decided on an ad hoc basis by big companies. Further delay will only exacerbate this problem.”

The troubles with Net Neutrality are a problem of the agency’s own making and its leadership’s utter failure to show courage in the face of Verizon, Comcast, and AT&T’s power and influence. Former FCC chairman Michael Powell (now top cable industry lobbyist) created the problem when he invented a classification for broadband as an “information service” out of thin air without any clear authority. At the heart of Powell’s “policy statement” were four basic Internet principles:

1. Consumers are entitled to access the lawful Internet content of their choice.
2. Consumers are entitled to run applications and use services of their choice, subject to the needs of law enforcement.
3. Consumers are entitled to connect their choice of legal devices that do not harm the network.
4. Consumers are entitled to competition among network providers, application and service providers, and content providers.

Powell’s principles stood as long as the FCC’s policies moved in lock-step with the telecommunications industry. When the FCC strayed from industry talking points and started showing some enforcement teeth, some of the same telecom companies that send the FCC cupcakes took them to court.

Former FCC chairman Julius Genachowski who insisted the FCC had authority over broadband because he said so believed the best way forward was to involve the industry in the development of Net Neutrality policies they could live with. After multiple private phone conversations and closed-door meetings, companies like Verizon helped write the guidelines for protecting the Open Internet and then, after they were implemented, sued the FCC in federal court.

“We are deeply concerned by the FCC’s assertion of broad authority for sweeping new regulation of broadband networks and the Internet itself,” said Michael E. Glover, Verizon’s senior vice president and deputy general counsel. “We believe this assertion of authority goes well beyond any authority provided by Congress, and creates uncertainty for the communications industry, innovators, investors and consumers.”

That’s gratitude for you, and it wasn’t the first time.

Phillip “Your Wallet = Czechoslovakia” Dampier

In 2010, an exasperated D.C. Circuit Court of Appeals didn’t exactly encounter Perry Mason when the FCC legal team showed up to defend its order demanding Comcast cease throttling broadband traffic. When the FCC threatened to fine Comcast, the cable company sued claiming the FCC had no authority over how they run their broadband business. Commission lawyer Austin C. Schlick delivered a less-than-robust defense of the FCC’s scheme.

“If I’m going to lose I would like to lose more narrowly,” Schlick confided. “But above all, we want guidance from this Court so that when we do this rule-making, if we decide rules are appropriate we’d like to know what we need to do to establish jurisdiction.”

Justice A. Raymond Randolph had none of it.

“We don’t give guidance,” Randolph grumbled, “we decide cases.” The FCC lost.

Legal experts already knew the FCC was on thin ice.  First, the Powell’s statement was never codified by the Commission’s own rulemaking procedure.  Second, the Commission framed the broadband policy as a set of “guidelines,” a term considered legally vague.  Third, the FCC relied on the concept of “ancillary” authority — borrowing regulatory authority from so-called “policy statements” coming from Congress, to claim jurisdiction.

DC Circuit Court

So it should come as no surprise that the same framework declared invalid when the FCC tried to spank Comcast was just as useless in shoring up the FCC’s authority to enforce Net Neutrality.

U.S. Circuit Judge David Tatel, writing for a three-judge panel, said that while the FCC has the power to regulate Verizon and other broadband companies, it chose the wrong legal framework for its open-Internet regulations.

“Given that the commission has chosen to classify broadband providers in a manner that exempts them from treatment as common carriers, the Communications Act expressly prohibits the commission from nonetheless regulating them as such,” Tatel wrote.

Judge Tatel could not have been more clear. In his second ruling, he noted the FCC’s ongoing resistance to reclassify broadband service under the well-grounded definition of a “telecommunications service” is at the heart of the problem.

But Wheeler, like his immediate predecessor Julias Genachowski, still stubbornly grips Powell’s flawed framework like a life-preserver off the Titanic:

The FCC promises Verizon they won’t have to sue again.

I am concerned that acting in a manner that ignores the Verizon court’s guidance, or opening an entirely new approach, invites delay that could tack on multiple more years before there are Open Internet rules in place.  We are asking for comment on a proposed a course of action that could result in an enforceable rule rather than continuing the debate over our legal authority that has so far produced nothing of permanence for the Internet.

I do not believe we should leave the market unprotected for multiple more years while lawyers for the biggest corporate players tie the FCC’s protections up in court.  Notwithstanding this, all regulatory options remain on the table. If the proposal before us now turns out to be insufficient or if we observe anyone taking advantage of the rule, I won’t hesitate to use Title II. However, unlike with Title II, we can use the court’s roadmap to implement Open Internet regulation now rather than endure additional years of litigation and delay.

Here is some news Wheeler can use: No matter what policies the FCC enacts or how, if they run contrary to the interests of Big Telecom companies, they will sue anyway. Net Neutrality appeasement by collaboration did not stop Verizon from promptly suing the FCC to overturn in court the rules the company helped write.

Wheeler needs to deal his reclassification card or get out of the game. It is increasingly clear it is the only legal basis under which the Court of Appeals will readily accept the FCC’s authority to oversee broadband.

Wheeler has his own set of Powell-like principles – the Four No-No’s of the Net:

Let me be clear, however, as to what I believe is not “commercially reasonable” on the Internet:

• Something that harms consumers is not commercially reasonable. For instance, degrading service in order to create a new “fast lane” would be shut down.

• Something that harms competition is not commercially reasonable. For instance, degrading overall service so as to force consumers and content companies to a higher priced tier would be shut down.

• Providing exclusive, prioritized service to an affiliate is not commercially reasonable. For instance, a broadband provider that also owns a sports network should not be able to give a commercial advantage to that network over another competitive sports network wishing to reach viewers over the Internet.

• Something that curbs the free exercise of speech and civic engagement is not commercially reasonable. For instance, if the creators of new Internet content or services had to seek permission from ISPs or pay special fees to be seen online such action should be shut down.

But there are plenty of loopholes in Wheeler’s proposals. First, “degrading service” goes undefined. As we’ve seen recently, there is a difference between purposely throttling a broadband connection and not maintaining and upgrading it to handle growing traffic. Second, Wheeler’s idea of what is “commercially reasonable” is not defined either. A provider could make all of its owned sports networks exempt from usage caps. That is neither “exclusive” or “prioritized.” It just doesn’t count against your usage allowance. Third, you might have open access to all of this content but won’t want it because your provider’s preferred partners get faster and more responsive service and less waiting for pages or videos to load.

Wheeler’s apparent naiveté about this industry and its behavior is beyond belief considering the decades he worked on behalf of the cable and wireless industry. Netflix foreshadows an Internet future without robust Net Neutrality. Verizon, Comcast and others ignore complaints about the degrading performance of Netflix, refusing to upgrade their connections of behalf of paying customers, until Netflix also agrees to pay them. When Netflix drops a check in the mail, the problem disappears. It doesn’t seem to matter that customers paying a very high price for Internet service cannot get the service they deserve unless someone else also pays.

If we can see this problem, it is extraordinarily curious why Wheeler cannot (or will not). Wheeler’s tough talk is cheap, but American broadband is not. Without direct action that reclassifies broadband as a telecommunications service, nothing Wheeler proposes or gets enacted is likely to survive the next inevitable court challenge.