It's a pretty poor response. They're using the fact that Level3 had a dispute with Cogent over unbalanced traffic to say the traffic between Level3 and Verizon should also be balanced. Verizon is not in that condition, it's not a transit provider.
Basically there are 4 different situations:
1) ContentProvider<->Level3<->Cogent<->ISP<->User
2) ContentProvider<->Cogent<->Level3<->ISP<->User
3) ContentProvider<->Level3->ISP<->User
4) ContentProvider<->Cogent->ISP<->User
In all cases the first network gets a payment by the content provider and the last network a payment by the user. In cases 1 and 2 the middle network is not getting a payment because neither side is their direct client. So the Cogent/Level3 dispute is about there being the same number of 1 and 2 cases so that it all evens out and no compensating payment is necessary. Cases 3 and 4 require no additional payments no matter the upload/download ratio because both network links have been paid for, one by the user the other by the content provider.
This whole thing is about the ISPs noticing that the content providers are making money offering content over the internet (shocking I know) and trying to reach across the network and grab some of that revenue, even though everyone has already been compensated for the actual transfer of bits.
Verizon acquired the Tier 1 transit network of UUNet/Worldcom. It has a huge transit/datacenter business. ATT(SBC+BellSouth) has Tier 1 transit network of the old ATT long distance. Centurylink has the old Qwest Tier 1 network. One of the things overlooked in the peering disputes is that many of the ISPs ended up merging/buying Tier 1 transit networks.
Netflix is one of the first ContentProviders to be pumping so much traffic that they will imbalance the peering traffic ratios of any almost any Tier 1 they buy transit/CDN from, except for probably Google, which ended up doing what Netflix is doing now: paid peering.
> Netflix is one of the first ContentProviders to be pumping so much traffic that they will imbalance the peering traffic ratios of any almost any Tier 1 they buy transit/CDN from
That's only relevant if the transit/CDN is actually peering with another Tier 1 provider to deliver the Netflix traffic (cases 1/2). What's been in the news has been cases 3/4 where there's a single transit provider in the picture and there's no reason for the ISP not to accept the content with no compensation for the asymmetry as it has a client paying him for that service.
> except for probably Google, which ended up doing what Netflix is doing now: paid peering.
Do you mean Google is also paying ISPs for access to users like Netflix has had to? Because if you mean Google is having to do paid peering with transit providers because their traffic is asymmetric that would just be normal payment for transit, as if Level3/Cogent/etc where providing transit to them.
Verizon (and ATT, and CenturyLink) are Tier 1 transit networks for peering operations. If Level3s peering traffic ratio are off balanced by netflix's traffic, I see no reason why Verizon shouldn't do the exact thing Level3 did to Cogent back in the day. Also, keep in mind Netflix is using Level3's CDN service, so you have a scenario on the flipside where Level3 has become a transit network and ContentProvider also.
The issue is really that the idea of transit providers in general are becoming obsolete. So much fiber was laid, with DWDM and further subdivision abilities, it costs comparatively nothing to get a nationwide network these days. That was Cogent's entire business model, buy cheap fiber, sell transit for almost nothing to content providers, practically (in some cases, actually) give away transit to ISPs/businesses to keep their traffic ratios as balanced as possible.
Now, we're in a situation where it's not technically or financially hard to have a presence in every regional peering point. The major content providers don't need transit providers (or in the case of Level3's CDN, are already provider) except out of convenience and their access to settlement free peering. The major ISPs have no need for transit providers(or are already providers), as all the content providers wants to peer with them, and most of them have nationwide networks to do so. (see comcast: http://business.comcast.com/images/default-source/about-us/t... )
Unregulated peering has lead to the cost of transit plummeting to almost nothing. ( http://drpeering.net/white-papers/Internet-Transit-Pricing-H... ) We've just hit an interesting point where 2 contentproviders (Netflix and Youtube) are half of all internet traffic, and the eyeball networks are all basically tier 1 transit providers. There's basically unlimited choice for transit providers for ContentProviders, but each eyeball only has 1-3 ISPs to choose from.
My thoughts are rather than attempting to regulate transit/peering, regulate that last mile network and let people choose their own transit provider. Back in the DSL days, I used a local ISP that provided cheaper/better service than our telco. If I could pay a flat $x/mo for 1gb connection to a transit provider of my choice, I'm sure Google or Level3 would offer cheap uncongested access.
They are huge companies so they can probably also provide transit service but that's not the case in this dispute. Netflix is willing to deliver the content anywhere Verizon/Comcast/etc require it either directly or by hiring a transit provider. So Netflix doesn't want transit service from these ISPs, it's already paying or building that by itself. The user is also already paying for the ISP network to work, so all segments of the network are already properly paid for once, no need to pay again.
Should anyone be able to connect to an ISP for free? Why can't I host my website for free, just paying an upfront cost for a server, and get it hosted in an ISP's facility?
Is there a relevant difference between that and what Netflix wanted?
> Should anyone be able to connect to an ISP for free?
Yes if they are willing to interconnect with that ISP at every exchange point. In practice that's expensive and what transit providers are for. Here's my proposal for a simple set of rules that would solve all these disputes:
This doesn't allow you to host your website for free because it only adds connectivity to the users of that specific ISP, not the whole internet. For that you have to buy transit.
http://publicpolicy.verizon.com/blog/entry/level-3s-selectiv...