Whilek uninhibited providing a fast lane of service for a fee. This is 1. 5 hours. Thank you very much. I would like to ask the and wie willcome up get you micd up. I am not going to give long and deductions. You have the full bio with you. I will briefly introduce the panelists was they have a chance to sit down. This thing out here for a second. Just do this for second. Some of you may be very familiar with this. We have asked our good friend from the Carnegie Mellon in university to give us a 10 or 15 minutes sort of technical background on all of these terms and how they fit in and what the architecture is. It is a daunting task to do. Turn it over to john. Thank you. It over to john. Thank you. Thank you. I will tell you everything you need to know. The internet feels like one big network, when we use it. But, if that were the case there would be no such thing as interconnection. The actually the internet is a network of networks. There are in fact over 66,000 independent, Autonomous Networks somehow work as one and each network in there is connected to one or more neighboring networks and that means, information that i send may travel from network to network to network before it finally gets to its intended recipient. So, for example, i have a student right now in uganda and i sent her a message this morning. Amazingly from whatever network i am at, it somehow figures out how to get my message to her in uganda. There are real challenges here. One of them, how does the network im connected to, know which of its neighbors can move that file toward her . Thats technical problem. That is a routing problem. Also, not only does there have to be a path all the way to uganda, but every network along the ways that to be willing to carry the information. Brings me another question. Why should it . There has to be a cost to this, has to be some intent tiff. The solution to both of these challenges is buried in the magic of Interconnection Agreements. An Interconnection Agreement where two networks come together agree on technical and Business Issues of exchanging internet traffic, including, will i carry any of your traffic, if so, which traffic will i carry. Talking about internet traffic, which described, telephone world, even though Technology Converge something quite different. This is internet. Dont, and these agreements are unregulated and typically highly confidential. We dont really know what the agreements look like between most networks. We do know they fit two basic categories. They are peering and transit. Let me talk a little bit about each of those possibilities. Pair something where networks recipro alley, provide connectivity to each others customers. In this figure and i should thank bill norton, im using his great figure here, in this figure, we have a Green Network and a blue network that are peering with each other. That means announcement flows from the Green Network to the blue network says, hey, if you want to talk to any of the customers of the Green Network, theyre over here. I know how to reach them. Send me your packets. And a similar announcement goes the other way, from the blue network to the Green Network. That solves our technical problem. Now all the customers of the Green Network can talk to all the customers of the blue network. Similarly in this figure, the blue network is peering with the red network. So all of their customers can talk to each other. Note peer something not transsieve. Green and blue are peering, blue and red are peering, but customers of the Green Network have no way to communicate with customers of the red network, not through peering. We need Something Else for that. So that technically what is going on. In terms of the business arrangements they vary. Traditionally, historically, peering was settlement free. Well search eve others customers and no money will exchange hands. That worked among peers and equals, if a Small Network approach as Large Network today, that Small Network will be asked to pay money. That is paid peering. Technically the staple but there is money involved. The other arrangement is transit. Through transit one network is able to provide access to the entire rest of the internet. Some subset of it they agreed to. So, in this case, we have a customer and a Transit Provider, the light blue network in my slide is the customer and it is going to the orange Transit Provider, saying let me communicate with all of the internet. And the Transit Provider says, here, i will send us announcements, here is every network in the world that i know how to reach. If you want to communicate with any of them, just send me your packets. I know how to reach them. And similarly all the light blue one sends announcement, if you want to talk to any of my customers, here is where you reach those. Once those are exchanged, anybody in the light blue network can communicate to anyone anywhere in the world, assuming the Transit Provider knows everybody. Everybody in this case, includes both Transit Providers direct customers. Since this Transit Provider in my figure is peering with the yellow Transit Provider, it includes the yellow Transit Providers customers too. Technically that is what is going on. Business arrangements, well the light blue network here is going to pay, and they are going to pay depending how much traffic they send to the Transit Network and how much traffic they get back from the Transit Network. Once you put those two types of agreements together you can put, create a little order in the chaos that is the internet. You can create something called a tier one network. A network is tier one if it is able to send traffic to the entire internet without paying anybody any peering or transit fees. Is not easy to be a Transit Network or a tier one network. You have to know about all those 66,000 networks in the world. You have to run a big infrastructure. You have to be a highly reliable. Its a lot of work. Once you do this youre in a new business. You can now offer Transit Services to any isp who wants it for a fee, which is exactly what happens. Tier one networks, charge, tier 2 networks to provide Transit Service. Tier 1 networks compete with each other to do this there is a lot of competition. Tier 1 networks peer, not generally, peer with each other settlement free. You see the hierarchy where the red tier 1 networks are connected to each other and tear 2 networks get their Transit Service from tear 1 and some cases Smaller Networks get their service from a tier 2. That is the internet at least as we understood it about a decade ago but its been changing. There are a few new things we need to understand. One of them is tear 2s a decade ago generally didnt connect with each other, thats been changing. More and more tear 2 networks are peering with each other to bypass the tear 1. In my top figure here in the slide, you see, ispa and ispb, both connected to a tier 1 Transit Provider and all the traffic flowing between them goes through that Transit Provider and they pay for it. You say what if they were to direct connectly as if in the lower figure . That means both of them would no longer have to pay transit fees for that traffic. They save money. On other hand there is a cost. They have to pay for peering connection which costs real money. Basically if there is enough traffic flowing between them this deal can be worthwhile and they can save some money. Increasingly were seeing tier 2 networks peering with each other. Another change over the last decade is the rise of content Distribution Networks or cdns. Traditional way of thinking about this is the left side, the left figure in my graph and my slide where content provider says, all right, here is my content, everybody in the world come get it from the servers but they may have to get it from all the way across the internet. That is slow and inefficient and actually much better if you can have them get that content from someplace close by. So they rely on cdns which are a collection of geographically distributed servers which copies of content can be stored. There are Companies Like akamai and limelight and others that offer this service. Some build their own networks which can be quite big. Of course if youre really big, you dont have to go to a cdn at all. Really big might in this case look like google which run as huge, global network, carrying an enormous amount of traffic that they just run themselves and they can interconnect directly with their very Large Networks because theyre very large themselves. So when you put all of that together, if you are a content provider and you want to get your content to say, customers of a given isp, how do you do it . You have three main choices. One of those choices you can build your own big network and you wan peer directly with that isp. Second choice, you can contract with a transit provide, a bunch of them out there and the Transit Provider will carry your traffic from your system over to that isp and reach those customers. Or, a third option you can go to commercial cdn and say, you host my content near those customers. Any of those are possible. Well, actually whether a cdn makes it depends on your application. For some application this is is great idea and for some it doesnt work as well which is another question. Let me bring to the most controversial discussion in this world which is the comcast and netflix discussion. Start with a caveat. I have no idea what is going on with comcast and netflix. I read lots and lots of accounts, but everything i read i consider basically from unreliable sources. So i will be a little careful here but it seems that netflix is, for a while, served comcast customers via Transit Network such as cogent and level 3 and probably a few others and netflix and also cogent were complaining that there was congestion on the transit connections. And after a while we know that netflix and comcast announced that they are in a peering arrangement. We assume it is paid peering. That netflix is paying. So how do we understand this . How do we think about this . Let me first talk about how i think we should not think about this but a lot of the press articles i read seem to. They annoy me and matter of therapy i i want to spread my annoyance on to all of you. There is a narrative that says, if contentheavy network like a network with lots of netflix content peers with an provider like comcast, one group says this inevitably transit traffic a burden on the content provider so the content heavy network should pay the cost of this burden. There is another work that says this kind of peering arrangement inevitably generates traffic that benefits both networks so the peering arrangement should be settlement free. Both of these arguments are wrong. You start to see that theyre wrong, peering doesnt generate traffic. End systems generate traffic. If i am a customer of comcast and i want to watch a netflix video and netflix is willing to show it to me, the netflix video goes through the comcast network, peering, no peering, doesnt matter. Is the end systems that generate. Now there are cases where peering matters but we need to peer a little more closely in terms of how much traffic comcast would have to carry. It matsers if end systems react to congestion in the network. They end the peering path and transit path, one of them is much more congested than the other and that actually seems to be what is going on here, right . What seems to be happening, we think, is that there was congestion in the transit links but the direct peer did not have that congestion. Why does that matter . Some application it is wouldnt. So happens for Netflix Streaming if youre watching a netflix video and youre watching highdefinition and congestion comes along, that application will automatically revert to low definition. So it will back off because of that, congestion reduces the load. So, seems by both accounts there was congestion. The interest question is why. First of all, stress, part of the point of story is you cant look at peering relationship in isolation. You have to look at the broader context to make sense of this. The interest question is why. There are some people who say, well, comcast likes the idea of congestion on their transit links. It got Companies Like netflix to enter into this paid peering arrangement and have to pay comcast. There are others who say that is ridiculous. Comcast wouldnt like congestion. Note that wouldnt just affect netflix. That would affect a lot of traffic and comcast says this was about cutting out middleman. This was about saving transit fees. If it was about congestion those Transit Providers were being unreasonable and werent doing their part to relief it. Which of these story is right . I dont have a clue. I have only got unreliable sources here. Let me wrap that up. Interconnection agreements are a central part of making a network of network like the internet work. They take lots of forms. There is peering, there is transit, there is paid, there is unpaid. All the result today of private, unregulated negotiations and those agreements are changing. There are new rules for cdn and content provider networks. An increasing number of peering relationships and changing financial terms and the question is why . Maybe well address that in the next panel. Thank you. [applause] [inaudible]. We have discussion on number of fronts about this before i introduce my panelists, i want to tell you if youre following this discussion on twitter, the hashtag for our event today, is hashtag fc cnet rules. Fccentrules. If you have questions and comments as were going feel free to do so. I have extremely distinguished panel to talk about these issues from variety of standpoints. I will introduce them real quickly and i will tell you the layout of all of this. I will ask everybody a opening question and ask everybody a closing question at the end. I have about three hours of questions clearly well not get to. Well save time at very end, last 20 minutes or so, for your questions. If you have them, prepare them and well get to you when we can. Let me introduce the panelists from my left down to the end. First is kevin warbacmh associate professor the legal studies and Business Ethics at university of pennsylvania of are worth ton school. Hal singer, Progressive Policy Institute and principal with economists incorporated. Professor jer fahlaber, Professor EmeritusBusiness Ethics an public poll i Wharton Business School and chief economist of fcc. Anna maria coke evacuations. Georgetown, policy center and. Cove evacuations. Kovacs. Start with a quick question for all of you. John just explained that interconnection with refers to the back end of internet. Currently it is regulated it is by thousand thousands of these private and confidential agreements between network operators, most of which are so far, at least we understand are done even on a handshake basis. Not a lot of them are even written down. I will ask each of you very quickly to give me your top line here. What role, if any do you think the fcc should be playing in regulating those agreements . I will start with kevin and go down the line. Sure. I think he started us off exactly in the right place which interconnection is essential to all Communication Networks and essential to internet. I think its a false dichotomy to suggest there is this internet world and which is this purely private nirvana and there is this Communications World and there is heavily regulated area where the fcc decide on every agreement. That was a false dichotomy in the past. It is more of a false dichotomy now as we go into the future. Those worlds are converging. Were going into a transition where the Public Switch Telephone Network is converging into an ip network. The fundamental question in that environment, is it appropriate to say, there is no role for a Public Policy backstop . I think that would be the wrong approach. I think for all the reasons that weve heard, interconnection is essential and, interconnection is a key opportunity for anticompetitive behavior. And for results that would constrain the information ecosystem. So i think it is absolutely right to say the fcc should not micromanage the process. For the most part it shouldnt be setting prices in the same way that it has for regulated incumbent telecommunications carriers. But i think it is important to have an fcc Public Policy backstop. One of the reasons was the reason that john gave us. We dont know. Were all speculating about this because all of these agreements are totally outside of the discussions that we have in Public Policy circles. But, all along, the fcc has been there in the background. The fcc never said, were never going to have anything to do with internet interconnection. What they said was, we belief traditionally this is competitive ma