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HOW DO BROADBAND NETWORKS EXCHANGE DATA?AND WHAT DOES IT MEAN FOR YOU?

The behind-the-scenes technology of getting an email from your smartphone to another user’s laptop, or streaming a music video from Mumbai while at your home in Dallas, is pretty much invisible to the typical broadband user, but involves a lot of sophisticated software and hardware… and some real operating costs.

The business of transferring data from where it resides to where it is needed is shared among all of the major network providers. They all need to cooperate to seamlessly connect you with the person or content at the other end point on the Internet. Think of it like using your ATM card to get cash from an ATM owned by a different bank.

If you put your card in your bank's ATM, the transaction is pretty straightforward. But, if you put your card in another bank’s ATM, the banking system needs a way to find your account in your bank (which may be on the other side of the planet), check to make sure you have sufficient funds in your account to fulfill your request, tell the ATM you’re using to issue the money and to print out a receipt for the transaction (including, sometimes, a fee), and let the dispensing bank know this all happened so they can account for the cash that was in their ATM and which you are now putting into your wallet.

How massive amounts of data get from one place to another on the Internet is equally magical – and invisible -- to most of us. There is a basic understanding among the major broadband network providers around the planet that each one will carry each of the other’s digital traffic at no charge to the other network based on assuring each other that they will exchange more or less equivalent amounts of Internet traffic over time.

The major networks don't insist that the amount of traffic they exchange with each other must always be “equal.” Each of them has a “peering policy” (in industry jargon, these large-volume data networks are “peers” of one another) in which they generally grant each other wide latitude – so even if traffic is out of balance by as much as 20 percent for a time, the exchange of traffic at no charge continues.

Occasionally, large volumes of traffic passing between networks can throw the system out of whack. Network A may find itself sending a lot more traffic to its peering partner (Network B), than Network B sends to Network A. When this happens, the network sending the imbalanced amount of traffic traditionally pays the receiving network for that privilege. It doesn’t matter what that traffic is – email, web-surfing, voice calls, surveillance cameras, video or audio streaming, data in the cloud, or anything else – peering agreements treat all the traffic the same. The payments are based on the traffic volume, not on the contents of traffic, and not based on the identity of the original “sending party” [i.e., a customer of the originating network who is sending large volumes of traffic through that network].

This framework makes good sense. As Internet traffic continues to grow, all parties that participate in the exchange of that traffic need to contribute to the expansion of the Internet. Payments by providers that are sending imbalanced traffic to networks who are receiving it help to support the receiving network’s expansion, ensuring that data can move seamlessly across the Internet.

And network traffic is exploding. Some estimate that, by 2020, new network investments of $1 trillion a year will be needed to keep up with the bandwidth demands due to online video and other new bandwidth-hungry services.

Sometimes – rarely – networks that are exchanging traffic with one another get embroiled in disputes over traffic that is out of balance. Since the system is built on networks each fairly absorbing costs imposed on it by the other (in exchange for the right to impose costs back), traffic imbalance can have real cost implications for network providers. For over a decade, these issues have been addressed and resolved through contracts – almost never have these matters gone to the courts or to regulatory agencies. The system has worked well.

As the Internet grows by leaps and bounds, the challenge is this: how can we best ensure ongoing investment in robust broadband networks, let networks continue to work out their traffic exchanges by contract, and permit any disputes to be resolved without involving the courts or the regulators?

Network providers and ISPs around the globe are working their way through these and similar issues so that users - especially those who use large amounts of digital content - can continue to enjoy the benefits of broadband, and so the fairness that makes the peering system work so well can be maintained.

RELEVANT NEWS AND RESOURCES

Level 3’s Appeal for Government Intervention Is Unwarranted - CableTechTalk 

The Real Story Behind the Comcast-Level 3 Battle - GigaOm

Paid Peering and Net Neutrality revisited - Ask DrPeering

How Well Does it Work—Comcast Paid Peering - Ask DrPeering

It’s not really louder just because it goes to eleven - ATT

Comcast Disputes Level 3's Accusations - WSJ.com 

HEARD ON THE STREET: Comcast's Deal Is on the Level - WSJ.com 

Understanding the Level 3-Comcast spat (FAQ) | Signal Strength - CNET News 

Time Warner Cable CEO: Comcast-Level 3 Dispute Nothing New - WSJ.com