Net Neutrality A solution in search of a problem

1
Net NeutralityA solution in search of a problem?

• Bill Hunt
• Level 3 Communications
• Oct. 10. 2007

2
What is a Level 3?

• Level 3 operates one of the largest and most
  advanced Internet backbones in the world.
• More than 48,000 fiber route miles in North
  America and Europe.
• Connects 180 markets in 18 countries.
• 4 Atlantic cable crossings.

3
What is a Level 3?

• Based in Broomfield, CO European headquarters in
  London.
• Founded in 1998 NASDAQ LVLT.
• 6,600 employees.
• Estimated Communications Revenue of 4.2 billion
  in 2007.
• Acquired 8 companies since December 2005 to
  expand network reach and capabilities.
• 4 strategic customer groups
• Wholesale Markets
• Business Markets
• Content Delivery
• Europe
• Level 3 provides infrastructure, data, voice and
  video services to
• Internet Service Providers
• Cable companies
• Local phone companies
• Long-distance providers
• Medium and large businesses
• Wireless companies
• International carriers

4
Level 3s IP network

• One of the largest IP networks in North America
  and Europe.
• Carries more than 1Terabit of billable customer
  traffic per month.
• Over 60 of the traffic that originates on the
  Level 3 network, stays on the Level 3 network.
• Averaging 100 annual IP traffic growth 2006
  capacity tripled.

5
Growing demand for IP networks

• Standard-definition TV requires 450 times the
  bandwidth per second of a Web browsing session.
• High-definition TV requires 2,700 times the
  bandwidth per second of a Web browsing session.

6
IP delivers economic advantages
Total Delivery Cost ( per Movie)

Store rental
1.4
1.2
Mail rental
1.0
0.8
0.6
0.4
0.2
IP delivery
0.0
2003
2004
2005
2006
2007E
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Will you know it when you see it?

• Network operators view Net Neutrality describes
  a transport service that does not favor the
  transmission of traffic generated by one
  application or one application provider over
  another
• Exception Traditional network management
• Traditional highway model except HOV lanes,
  restrictions on trucks, slower traffic or toll
  lanes

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Will you know it when you see it?

• Legislative definition ambiguous. No agreement.
• Broadest sense - Should network owners, operators
  be prohibited from favoring
• Transmission of traffic generated by one
  application (ex. Their video offerings vs.
  Internet TV) or
• One application provider over another (Google).
• Fear If providers and applications are not
  treated equally, network owners will block or
  impair traffic unless application provider agrees
  to pay for priority access for the last mile

9
A wholesale view

• The shift in IP networks is more about
  communicating visually instead of aurally
• Without understanding the problem, the cure could
  be worse
• The Internet is not static, its a technological
  bazaar where new developments constantly
  challenge paradigm
• Never underestimate network, software engineers
  to crack the code
• Absence of a neutrality mandate does not mean
  that priority will become a commodity
• Reasons why
• Competitive pressure from other networks
• Threat of regulation or legislation
• Costs of implementing, enforcing priority network
• Identifying commercial terms under which priority
  is sold and limitations on its use

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How it works

• Simple peering relationship

ATT
Level 3
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Does tying create a winner?

• Priority requires direct access

ATT
Level 3
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Remember Netscape?

• Consumers will play major role in acceptance of
  priority services
• Video is the driving force, not voice
• Policies should promote development of new last
  mile broadband facilities
• Wireless, satellite, power lines, anything
• Rights of way, building access
• Beware establishing a regulatory model for cost
  recovery let the market do that Theres no
  need for a corporate entitlement
• Until competition exists in the last mile,
  antitrust enforcers must carefully evaluate
  conduct of last-mile network owners
• Cannot exclude competitors
• Cannot improperly leverage last mile connections
• Government mechanisms must be swift, efficient to
  be effective

13
Future of Net Neutrality

• A state legislator who was also a dairy farmer
  described an issue like this once, When you have
  a good milk cow, you dont slaughter it.
• Translation Many more forums, conferences,
  policy meetings and fund-raisers ahead on Net
  Neutrality