New Models and Conflicts in the Interconnection and Delivery of Internet-Mediated Content
Posted: 22 Mar 2014 Last revised: 29 Mar 2014
Date Written: March 21, 2014
This paper examines the dramatic changes in interconnection and compensation agreements between content providers and carriers resulting from increasing use of the Internet for bandwidth intensive carriage of video. It identifies two emerging models: 1) interconnection and compensation arrangements that increase the total payments to Internet Service Providers (“ISPs”) from end users, upstream ISPs and content providers; and 2) strategies by content creators and distributors to achieve congestion-free delivery at the lowest cost. While supportive of commercially negotiated agreements, the paper suggests that the two emerging models will trigger more disputes as interconnecting parties increasingly lack motivation to cooperate in finding ways to balance traffic flows and instead seek ever increasing compensation. The paper recommends that National Regulatory Authorities require ISPs to engage in transparent network management practices, backed up with reporting requirements that can help identify the causes of congestion and degraded service. The paper also suggests ways for regulators to resolve disputes between ISPs and content providers that could harm consumers, particularly when retail ISPs, providing the first and last kilometer of service, seek to leverage access to end users by demanding surcharges from upstream carriers and content providers. By creating such a bottleneck, retail ISPs may reduce the value of Internet access subscriptions, or increase costs even when congestion remedies do not require more broadband network capacity. Reporting requirements can provide empirical data for necessary forensic investigations that can determine whether a massive increase in traffic volume has caused congestion, or a carrier has artificially created it by strategic allocation of existing bandwidth and switching capacity.
Keywords: Internet interconnection, Internet compensation models, paid peering, Content Distribution Networks, IPTV
JEL Classification: K23, L82, L96, L98
Suggested Citation: Suggested Citation