Internet Middleman: Some ISPs 'Deliberately Harm Customer Service'

May 6th, 2014
in econ_news, syndication

Econintersect:  The operational structure of the internet is based on the receivers of information paying an internet service provider (ISP) to deliver content to them.  These end users pay fees based upon the bandwidth that they wish to receive.  The providers of content are not charged for the amount of content they send; that volume increases as the ISPs receive subscriber payments from end customers.  The system appears to work fairly well when there is competition for the end customer service.  A report by Timothy B. Lee on Vox indicates that there are cases where large providers have no competition and there the system is not working.


Follow up:

Lee says there are five major U.S. ISPs with dominant positions in their markets that have been providing sporadic service for over a year.  He says there is a sixth ISP with a similar situation in Europe.  The short version of what is happening is that applications with high bandwidth (live video, for example) are delivering incomplete signals (dropping packets) during high traffic periods during the day.  It is not clear if throughput is simply being "restrained" or if maximum load capacity is insufficient.  In either case the problems are only occurring where there is no competition between multiple ISPs.

The appearance is that where the problem arises it is because the ISP is not running their system at full capacity or they are and have not expanded that capacity to meet peak traffic loads.  Whichever is the case, according to Lee, it is not happening where there a two or more competing providers.

Disclosure: The remainder of this article contains editorial comment.

This is how crime syndicates operate.  They get control of all the providers of a service for an area and then gouge for the service.  Examples of this have occurred in the garbage disposal business.  Now the appearance of such shake-down practices is occurring in internet traffic services.

Lee has talked with Level 3, the world's largest provider of long-distance internet connectivity between ISPs.  Of the 51 global ISP systems interfaced by Level 3, 45 operate in markets with competition for end users.  None of them have any capacity problems.  The other six, with the congestion problem, are all "large Broadband consumer networks with a dominant or exclusive market share in their local market."

Perhaps this is just a coincidence?

Not according to Level 3 VP Mark Taylor who has charged that these six ISPs 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 says that companies with the congestion problems rank dead last in customer satisfaction by a massive statistical margin across all industries.

But why should they care.  Where else can their end users go?

Some content providers feel forced to pay for "protection".  In another Vox note, it is revealed that Netflix has entered into agreements with Comcast (in February) and Verizon (in April) to pay these ISPs to guarantee that their videos would "play smoothly".  In the preceding months customers had complained of declining service speeds.  Once Netflix signed the "protection agreement" with Comcast their customers reported a 67% improvement is average connection speed.

This all plays into the resurfacing net neutrality story (GEI News 01 May).  The FCC (chaired by a cable industry lobbyist and venture capitalist Tom Wheeler) is proposing to add government sanction to the shake-down racket.  This is causing those who staunchly defend net neutrality (equal access for all internet users) to protest.

Another related story concerns the proposed Comcast/Time Warner merger.  This would combine the two largest cable companies (and hence giant ISPs) and could strengthen the hand of protection racketeers.

In the video below Brian Stelter, CNN, interviews Peter Lauria of Buzzfeed, who explains why many content providers (other than Netflix) are not speaking out about the congestion problems and with concerns about the Comcast/Time Warner merger.

John Lounsbury


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