The age of monopolistic control over internet traffic is here. “We’re really, really fucking this up”, says Nilay Patel of the new age of pay-to-play internet, ushered in first by the Verizon v. FCC court decision last month, and more recently the Netflix-Comcast peering deal.
In this new deal, Netflix will pay Comcast to deliver its content directly to Comcast customers, rather than going through a traditional middleman like Cogent Communications (which is having its own battle over Netflix traffic with Verizon). In the short term, this is good news for Comcast subscribers, who are guaranteed faster video streaming service — Netflix reports that the speed of its service to Comcast customers had slowed by 25% over the last few months. Over the longer term, though, “the more fundamental issue is that the [internet service providers] have sole dominion over the one link in this chain — the last mile — that can’t be replicated and can’t be circumvented”, says Cardiff Garcia.
Timothy Lee does a good job of explaining how the internet has worked up until now: companies like Netflix pay a middleman to upload their content. You pay a different internet service provider (Comcast, Verizon, TWC) to connect to the internet and download all that content at home or work. All of the many providers share content with one another equally and for free — that’s called “peering”. But, Lee says, Netflix is cutting out the middleman and is now paying for a direct peering agreement with Comcast.
Patel calls the CEOs of Comcast, AT&T, and Verizon “robber barons for a new age of infrastructure monopoly”. Tim Wu, analyzing both the Netflix deal and Comcast’s acquisition of Time Warner Cable, says “the bigger [Comcast] gets, the more credible its threats become, and the more money it drains from everyone”. Guan Yang compares the deal to your apartment building charging Netflix to bring its red DVD envelopes through the door, even though you pay for a mailbox and Netflix pays for shipping. In that case, he says, “you don’t really have a choice of an alternative mailbox/lobby provider if you think their terms are unfair”.
The deal doesn’t directly infringe on the principle of net neutrality; Stacey Higginbothom explains why the FCC left peering out of net neutrality. Lee, however, says that the deal fundamentally changes the problem:
The conventional network neutrality debate implicitly assumes that residential ISPs receive Internet traffic from one big pipe ... But in a world where Netflix and Yahoo connect directly to residential ISPs, every Internet company will have its own separate pipe. And policing whether different pipes are equally good is a much harder problem than requiring that all of the traffic in a single pipe be treated the same.
-- Shane Ferro
On to today’s links:
Data Points
The average American family's "color wheel" of spending - Derek Thompson
Listicles
5 reasons why right now is a great time to shrink the US Army - Zack Beauchamp
Amazing
Ghostbusters is a "Reaganite carnival of ideological triumph" - Matt Phillips
Wow
A brutal and truly damning piece on Bill Gross's management of PIMCO - Gregory Zuckerman and Kirsten Grind
This article could be "be a fatal blow to the career of the greatest bond investor of all time" - Felix
Distinctions
Public policy should focus on raising standards of living, not mobility - James Surowiecki
Please Update Your Records
German austerity is a myth - Paul Krugman
Politicking
Walmart's shadow campaign to support raising the minimum wage - Dave Weigel
Oxpeckers
DealBook goes to great lengths to reveal who's behind a mildly funny fake Twitter account - Andrew Ross Sorkin
Everyone's a once-in-a-generation talent, you know - Erik Wemple
Why it's so hard to get graphs in newspapers - Paul Krugman
Robots
"This stool is made of three pieces and no humans have to get involved in assembly" - Gigaom
Takedowns
"Our name-brand financial writers are too big to practice journalism" - Alex Pareene
JPMorgan
After announcing 13,000 jobs cuts last year, JP Morgan will cut another 5,000 in 2014 - David Henry and Peter Rudegeair
Bankers
RBS gives back to the community by having its bankers unload forklifts two days a year - Max Colchester
Great Headlines
Post-Structuralist Mayor Disregards Your Epistemological Conjectures - Alex Balk
Hilarious Jargon
"100% autonomous penetration" - Tesla
Tax Arcana
The real secret elevators are at Credit Suisse. And they're used for tax evasion - FT
Study Says
Riding the train makes people more inclusive - Boston Globe
Your Daily Outrage
Temps can work at the same company for 11 years - ProPublica
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