Large web firms are charged 10s of millions of dollars in extra fees for faster Internet access - fair to Netflix?

Wall Street Journal today reported that Comcast charges $25 million to $30 million a year in fees from companies such as Google, Facebook and Microsoft for connections to get smoother and faster Internet access to their networks. Similarly, Time Warner Cable is believed to be earning 10s of millions of dollars from similar fees. Verizon and AT&T declined to comment.

Is this a fair practice? Or does this put someone like Netflix, which reportedly declined to pay the premium fees to ISPs, in a disadvantaged position?

In terms of legality, WSJ reports that there is no malpractice against the “open Internet” rules also known as “net neutrality”, because those rules only govern the last mile. But that doesn’t necessarily make the practice fair. In my opinion, the fairness issue comes down to if the bandwidth allocations are a fixed-sum-game or not and how the premium services are implemented. What I mean by this is, if improving the service for a premium client A, can be done without taking away anything from the non-premium client B, then I see no issue with ISPs charging premium client A for better service. We, at Mushroom Networks, do that all the time by providing Internet aggregation devices that improve the Internet speeds for businesses who pay for our products, but in no way, this hurts anyone else’s performance who doesn’t have our solution. However, in the ISP’s case, since the bandwidth capacity is a fixed resource, if you allocate more of it to a premium client, guess what, you are taking away from the non-premium clients.

This is why transparency in crucial for these types of services; as transparency can shed a lot of light if indeed it is a fixed-sum-game where the non-premium clients suffer or if it is not a fixed-sum-game and the premium services provided do not take away capacity from the non-premium clients. I just find it odd that this report coincides with the recent reports about services such as Netflix being degraded by ISPs.

Cahit Akin, CEO, Mushroom Networks, Inc.

Mushroom Networks is the provider of SD-WAN (Software Defined WAN) and NFV solutions capable of Broadband Bonding that enables self-healing WAN networks that route around network problems such as latency, jitter and packet loss.

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