Here's a suggestion on how to implement a fair interconnect market. The world's regulators designate a few physical locations as public interchange points governed by the following rules:
1) If you are an ISP you need to be present in all the interchange points of the geographical areas where you are licensed to operate in.
2) Any ISP can connect to any other ISP at those points with no charge.
3) Whenever an ISPs link is above 90% peak usage for X days he has to upgrade.
That way everyone pays their own way. If suddenly Comcast customers sign up for Netflix in droves both Netflix and Comcast need to invest to upgrade the links on their side of the interchange, Netflix because they're being paid for the streaming service, Comcast because they're being paid for internet service. If you can come to some other arrangement with interchange at some other point, more power to you, but to be an ISP you are obligated to interchange freely with anyone at these points.
This is a terrible solution. If you think the situation right now is bad, your solution will only exacerbate the problem.
Right now, these exchange points you discuss already exist in the form of IXPs (Internet eXchange Points), which are privately owned and operated. Anyone that wants to peer at an IXP can do so (usually, and assuming you lay your own cable to get there), and whether or not a peering is made is decided by the would be peers. In the world you illustrate, these peering decisions are made by government regulators.
Why is this bad?
If everyone has to peer with each other for free, why would anyone ever lay their own cables to anything but an IXP? More importantly, the profitability of being a transit provider (think AT&T, Level3, etc.) is already dropping off a cliff due to ridiculously low margins. In your world, there is literally zero money to be made as a transit provider. In fact, you strictly lose money providing that service. Short of a government takeover of all Internet infrastructure, there is no feasible way to implement your solution without putting companies out of business in droves.
You effectively make the entire backbone of the Internet a public service. Your solution asks companies, which have expended enormous amounts of capital on infrastructure, to share their capital expenditure with anyone and everyone. That's entirely unfair to those companies, and it renders their investment useless.
>Anyone that wants to peer at an IXP can do so (usually, and assuming you lay your own cable to get there), and whether or not a peering is made is decided by the would be peers.
Right, and the three rules are about regulating how those decisions get made.
>In the world you illustrate, these peering decisions are made by government regulators.
No, they're still made by the ISPs, it's just that as long as one of them wants it the other can't say no.
>In your world, there is literally zero money to be made as a transit provider.
Not really. Unless you're willing to connect to all the interchange points in the world you will be paying a transit provider to access all the interchange points you don't peer at directly, just like it happens today.
>Your solution asks companies, which have expended enormous amounts of capital on infrastructure, to share their capital expenditure with anyone and everyone. That's entirely unfair to those companies, and it renders their investment useless.
Which companies are your referring to? The end-user ISPs will continue to charge their clients. The transit providers will continue to charge ISPs to connect to other interchange points. The CDNs will continue to provide the same service. No one is getting to use infrastructure for free. In fact the exchange points are just physical points, the fibers going into them are paid by each of the ISPs peering. Everyone pays their own way.
>So, if I'm Netflix and I operate an AS based in California, I connect to an IXP and every customer facing ISP has to take my traffic.
Every customer facing ISP that operates in the area of that IXP yes.
>So then I send my traffic over AT&T's line to NYC where AT&T connects to an IXP
AT&T has no obligation to provide you with that transit. It just has to accept traffic at your IXP and deliver it inside their network, not to other IXPs. To make it even fairer to large ISPs you could even say that they only have to deliver it to the part of their network covered by the IXP where you inject the traffic.
>and each ISP at that IXP has to pay AT&T for access to AT&T's backbone.
I don't follow. What's forcing them to pay anything? Definitely not my peering rules. If AT&T has decided to transit traffic between IXPs the ISPs are definitely not being forced to pay for it.
Here's a more descriptive version of my proposal. All customer facing links need to be connected with free peering to a regional IXP, making the last mile net neutral. To get actual global routing of traffic you need a route to all IXPs in the world. You can build infrastructure to every IXP in the world yourself or you can pay a transit provider to do that for you, possibly in coordination with other transit providers. This way ISPs can't use their last mile monopoly to extract rents and there's still competition between transit providers to create good backbones.
Consider a local ISP in Dallas TX. Since all major backbones run through Dallas, the local ISP can now connect to all the backbones for free and essentially pay nothing?
I think your rule #3 might be enough on its own. Let Comcast choose whether to peer with Netflix or receive their traffic via transit, as long as there is no congestion. Given that transit costs money, this will bring Comcast to the negotiating table.
>Consider a local ISP in Dallas TX. Since all major backbones run through Dallas, the local ISP can now connect to all the backbones for free and essentially pay nothing?
The backbones are not included. You're only forced to link at the interchange point if you are providing service to end-users, be they residential or servers.
The point of the interchange points is to enforce net neutrality at the local level and then let the market deal with transit between them. The CDNs and transit providers would sell service to connect ISPs to exchange points they're not directly peered at.
>I think your rule #3 might be enough on its own. Let Comcast choose whether to peer with Netflix or receive their traffic via transit, as long as there is no congestion. Given that transit costs money, this will bring Comcast to the negotiating table.
That wouldn't work if the provider is willing to drop them completely. The rule would have to be "You have to be able to reach 100% of the internet and none of your peering points can be above X% peak utilization".
1) If you are an ISP you need to be present in all the interchange points of the geographical areas where you are licensed to operate in.
2) Any ISP can connect to any other ISP at those points with no charge.
3) Whenever an ISPs link is above 90% peak usage for X days he has to upgrade.
That way everyone pays their own way. If suddenly Comcast customers sign up for Netflix in droves both Netflix and Comcast need to invest to upgrade the links on their side of the interchange, Netflix because they're being paid for the streaming service, Comcast because they're being paid for internet service. If you can come to some other arrangement with interchange at some other point, more power to you, but to be an ISP you are obligated to interchange freely with anyone at these points.
What am I missing?