Netflix, call your lawyers: FCC is ready for interconnection complaints (2024)

When Netflix launched a public relations war to claim it was being fleeced by Comcast and other Internet service providers, the company didn't have much recourse outside the court of public opinion.

But with yesterday's Federal Communications Commission vote to regulatebroadband providers as common carriers under Title II of the Communications Act, that's about to change. Instead of just writing a check to obtain direct connections to the networks of retail broadband providers, Netflix can complain to the FCC that it's being overcharged.

"For the first time the Commission can address issues that may arise in the exchange of traffic between mass-market broadband providers and other networks and services," yesterday's FCC announcement said. "Under the authority provided by the Order, the Commission can hear complaints and take appropriate enforcement action if it determines the interconnection activities of ISPs are not just and reasonable."

Interconnection (or "peering") allows networks to exchange traffic directly. Large network operators known as "transit providers" carry the traffic of many online content providers and connect directly to ISPs so that the traffic can get to Internet users. Occasionally, a content provider becomes so big that it builds out its own network infrastructure and seeks interconnection from the ISPs directly.

That's what happened with Netflix, but it wanted the ISPs to provide interconnection for free. Netflix did get free interconnection from a number of ISPs, but not the biggest ones: Comcast, Time Warner Cable, AT&T, and Verizon. While the money dispute raged,Netflix spent months across 2013 and 2014 sending trafficthrough transit providers that were too congested to handle the load. This caused real problems for consumers, who had trouble accessing Netflix and other content coming over those congested pipes. Netflix eventually paid the four big ISPs for interconnection, allowing traffic to flow smoothly again.

The FCC last year asked Netflix, the ISPs, and other companies fordetails of their paidpeering agreements, but did not take any further action. Yesterday's decision also doesn't pass judgment on any current or past disputes. But Netflix and other companies could file complaints about future ISP demands, perhaps preventing or minimizing the kinds of problems that plague consumers when network operators argue over money. Netflix may also be able tofile complaints about its existing contracts with Internet providers.

Comcast: We're not worried

Comcast says it isn't expecting the FCC to order any changes. "We believe any examination of our interconnection practices will show they are fair and market based," a Comcast spokesperson told Ars.

A Comcast filing with the FCCquoted Netflix CEO Reed Hastings as saying the paid peering deal "works great for consumers." The filing also says, "Netflixconceded in an email to Comcast executives that 'you [Comcast] madepaid peering affordable for us.'"

While terms of the deal were never disclosed, it doesn't seem to be a backbreaking expense.Netflix CFO David Wells told investors that content, rather than interconnection, remains the company’s biggest expense. Still,Netflix CEO Reed Hastings argues that interconnection should be free,as Netflix is just delivering traffic requested by consumers who already pay their Internet service providers for access to the whole Internet.

Although the FCC hasn't declared that peering should be free, it wants to make sure ISPs don't letpeering disputes degrade traffic to consumers. The commission has "authority to address interconnection disputes on a case-by-case basis, because the promise to consumers that they will be able to travel the Internet encompasses the duty to make the necessary arrangements that allow consumers to use the Internet as they wish," the FCC said in its announcement.

When asked if Netflix or other companies could challenge existing agreements, an FCC official told Ars, "this would be looked at on a case-by-case basis, so the question of whether a party could allege the terms of an existing contract are not just and reasonable would have to be judged on the facts presented."

Hastings was asked by investors in January if he expected the FCC's new policies to declare the company's paid peering agreements invalid.

"We would not expect that they would trump existing contracts," Hastings said. "But what's been great for Netflix is the generalidea of the Internet as a utility, open to all, not for discriminatory use—has really taken hold." Reclassification should "insulate us from any accelerating attacks for interconnection," he said. "So I imagine we would likely liveout the current deals, and that's what's in our plan."

But a Netflix spokesperson today did not rule out filing complaints over current deals. "Wedon't know if they would apply retroactively," Netflix said. "So we will review the language when the order is released and decide accordingly."

The FCC hasn't yet published the full Title II decision, but it should be available soon, as is standard practice for FCC votes. The Title II order also lays out net neutrality rules that prevent ISPs from interfering with traffic once it enters their networks; the interconnection portion deals with how traffic enters the broadband providers' networks.

Time Warner Cable declined to comment. We also asked AT&T and Verizon if they expect complaints under the new interconnection standard but haven't heard back.

Level 3 and Cogent mulling their options, too

Transit providers Level 3 and Cogent also warred with the ISPs when they were carrying Netflix traffic over congested pipes. While large network providers often interconnect without payment in what's known as "settlement-free peering," the ISPs demanded payments from Level 3 and Cogent when the additional Netflix traffic caused them to send far more traffic than they received.

A Cogent spokesperson, when asked if it plans to file complaints, told Ars that "If broadband ISPs continue to throttle traffic at interconnection points, Cogent will complain." Cogent noted that no complaints can be brought until 60 days after the FCC's order is published in the Federal Register.

As a clarification, ISPs were not (as far as we know) "throttling" interconnection points. Rather, they refused to add capacity until they received money, which had a similar effect because it caused congestion that slowed Internet traffic down.

While Cogent has refused to pay Comcast, Level 3 agreed to do so after a dispute in 2010.A Level 3 spokesperson told Ars thatthe company needs to read and understand the new rules before deciding on any action.

The new Title II classificationapplies only to "last-mile"Internet service providers like your local cable or phone company, and wireless carriers, but notnetworks that don't carry traffic all the way to Internet users.

In addition to selling transit (i.e. distributing traffic across the Internet on a client's behalf), Cogent acts as an Internet service provider for businesses. Cogent CEO Dave Schaeffer told Ars he isn't sure whether that portion of its business will be considered a common carrier service. But he said he had urgedthe FCC toclassify transit as a common carrier service, although the FCC did not do so.

Cogent last yearslowed downcertain traffic to handle itsNetflix problems. Schaeffer said he believes the action Cogenttook would be allowed under an exception for "reasonable network management."

"We do not prioritize traffic within our network at all, it only occurred at the interconnection point, and it only occurred in those instances when the ports were congested," Schaeffer said. "I believe that would probably still fall under the network management guidelines."

Schaeffer said he hopes ISPs "just obey the rules, upgrade the ports, and I won't have to file a complaint, but if they choose to ignore the rules we will have no choice but to file a complaint."