Content is king, but who rules?

Content is king, but who rules? Is an open Internet @ risk? IP Interconnection trends from a hybrid hosting provider perspective Bart van der Sloot Managing Director LeaseWeb Network May 19, 2016

About me

Overview 1. Introduction why care / why now? 2. About us 3. Quality versus costs the art of traffic routing 4. IP Interconnection: trends to worry about 5. Mitigation strategies 6. LeaseWeb approach teaming up

Why care? / @Home: Are you getting what you pay for?

Why care? / @Work Content: Can you compete?

Why Care? / @Work IX: Will you become a niche platform serving small ISPs and small content providers? @? @? @?

Why Now?

Why Now? Ziggo Vodafone NL merger What can we learn from the EU remedies in the LGI Ziggo acquisition? Source:

ABOUT LEASEWEB Founded in 1997 in the Netherlands Hybrid Infrastructure as a Service (IaaS): Dedicated Servers & Colocation Public and Private Cloud services Storage Content Delivery Networks Combined with Internet Connectivity 16 Data Centers (EU, US, Asia) ~75.000 servers ~320 employees worldwide, ~250 in EU Generating 2.5 Tbps of Internet traffic 3 x 100G ports @ AMS-IX

CUSTOMERS PaaS and SaaS OTT Video and Audio content E-commerce Online gaming Cybersecurity Web analytics and intelligence Enterprises

IP Interconnection options 1 of 5: IP Transit Transit Provider 1 Transit Provider 2 Transit Provider N Core Routers Transit Provider 1 Transit Provider 2 Transit Provider N Core Switches LSW Server Rack LSW Server Rack LSW Server Rack LeaseWeb NL AS60781

IP Interconnection options LeaseWeb Global Network AS16265 2 of 5: Local Private Peering Peering Core Routers Local Private Peers Transit Provider 1 Transit Provider 2 Transit Provider N Core Routers Transit Provider 1 Transit Provider 2 Transit Provider N Core Switches LSW Server Rack LSW Server Rack LSW Server Rack LeaseWeb NL AS60781

IP Interconnection options LeaseWeb Global Network AS16265 3 of 5: Local Public Peering Local Public Peers AMS-IX Peering Core Routers Local Private Peers Transit Provider 1 Transit Provider 2 Transit Provider N Core Routers Transit Provider 1 Transit Provider 2 Transit Provider N Core Switches LSW Server Rack LSW Server Rack LSW Server Rack LeaseWeb NL AS60781

IP Interconnection options Remote Private Peers LeaseWeb Global Network AS16265 4 of 5: Remote Private Peering Wavelength services to other cites Local Public Peers AMS-IX Peering Core Routers Local Private Peers Transit Provider 1 Transit Provider 1 Transit Provider 2 Transit Provider N Core Routers Transit Provider 2 Transit Provider N Core Switches LSW Server Rack LSW Server Rack LSW Server Rack LeaseWeb NL AS60781

IP Interconnection options Remote Public Peers E.g. PLIX Remote Private Peers LeaseWeb Global Network AS16265 5 of 5: Remote Public Peering Wavelength services to other cites Local Public Peers AMS-IX Peering Core Routers Local Private Peers Transit Provider 1 Transit Provider 1 Transit Provider 2 Transit Provider N Core Routers Transit Provider 2 Transit Provider N Core Switches LSW Server Rack LSW Server Rack LSW Server Rack LeaseWeb NL AS60781

Traffic routing considerations 1. Quality Latency, packet loss during peak hours Both inbound and outbound traffic 2. Cost per Mbps 3. Flexibility to cope with traffic volume swings 4. Importance of NOC-to-NOC contacts Monitoring using RIPE Atlas

IP Interconnection in Asia IP Interconnection IP Transit Public peering in Singapore (Equinix) and Hong Kong (HK-IX) Various private peerings IP Transit pricing >4x Europe Challenge: Inbound traffic via US Peering: OK if remote, not local (so the customer suffers ), rather formal approach China Direct in HKG: ~ 30x IP Transit market prices

IP Interconnection in the US IP Interconnection IP Transit Public peering in NY, Ashburn, Chicago, San Jose, LA, Palo Alto, Atlanta Various private peerings Until early 2015: Comcast, AT&T hard to reach via Transit, paid peering pricing > 3 x IP Transit pricing April 2015: FCC Open Internet Ruling resolving peering capacity constraints between Tier 1 networks (Cogent, Level 3) and dominant Access ISPs (Comcast, Verizon, )

IP Interconnection in the US 204. Broadband Internet Access Service involves the exchange of traffic between a last-mile broadband provider and connecting networks. The representation to retail customers that they will be able to reach all or substantially all Internet endpoints necessarily includes the promise to make the interconnection arrangements necessary to allow that access. As a telecommunications service, broadband Internet access service implicitly includes an assertion that the broadband provider will make just and reasonable efforts to transmit and deliver its customers traffic to and from all or substantially all Internet endpoints under sections 201 and 202 of the Act. In any event, BIAS provider practices with respect to such arrangements are plainly for and in connection with the BIAS service. Thus, disputes involving a provider of broadband Internet access service regarding Internet traffic exchange arrangements that interfere with the delivery of a broadband Internet access service end user s traffic are subject to our authority under Title II of theact.

IP Interconnection in Europe IP Interconnection IP Transit Public and private peering in Amsterdam, Frankfurt, > 15 other cities In many countries all ISPs support settlement free in-country or remote private and public peering...

Europe good examples Services / Content Transit/Peering Access ISP CN TP Transit ISP Transit Settlement free peering (CDN) Allows full independence of decision for Content network and Access ISP IP Transit market very competitive, keeps all others in check. Courtesy: Cogent Communications

Europe: Dominant ISP s in some large EU countries (DE, FR, SP): Don t support local settlement free peering with content networks, only paid peering or IP Transit Operate their own international IP backbones Offer remote IP Transit or paid peering Enforce traffic ratio s to allow settlement free peering Restrict peering capacity with Tier 1 networks to force payment ( packet loss, traffic restrictions in Tier 1 IP Transit services, separate excessive pricing). Effective cost/mbps for paid services up to 4 x higher Behavior now spreading to other dominant ISPs

Europe concerning examples Services / Content Transit/Peering Access ISP CN TP AP Peering CDN Paid Peering Consumer: degraded user experience Content network: pushed to peering at uncompetitive pricing Transit Providers: pushed to buy from peers or be evicted from destination Courtesy: Cogent Communications

Why to cover capex? ISPs do all the investments in broadband infrastructure and content networks get a free ride BEREC report BoR (12) 130 (sources: WIK, ARCEP, AT Kearney, Cisco, annual reports Telecom Italia, Orange, Arthur D. Little): Taking together the evidence provided above BEREC considers that the expected volume increase will not require a significant CAPEX increase in fixed network. There is no evidence that cost are skyrocketing because of traffic increases. In fixed networks usage-based costs - accounting for 10-15 % of total costs for fixed broadband networks are roughly stable. Thus, if technological progress leads to cost improvements (on a per unit basis) which outweigh the increase in traffic volumes then there would be no negative effect on the overall cost position of a network operator.

Why to cover capex? ISPs do all the investments in broadband infrastructure and content networks get a free ride Free Ride? Both content networks/hosting providers and access ISPs/ telecom companies spend 15-20% of revenues in capital expenditures to cope with growth.

Why to compete with OTT services? versus Who is first to Ultra HD? Source: annual reports

Consolidation in Access ISPs 90% market share with 2 providers

Concentration in content 67% of content provided by 6 sources

Impact on competition & innovation IP Interconnection costs have a huge impact on the cost to run a Content and Application Platform (>50% for Content Delivery Networks). IP Interconnection costs will triple if Europe becomes like Germany IP Interconnection costs will become prohibitive for the business case for new OTT services especially for broadcast grade HD/UHD services. Deliberate capacity restrictions in IP Interconnections are a threat to critical real time services. Peering dispute between a connected car platform and a mobile network?

IP Interconnection in Europe Conclusions Ongoing consolidation in Access ISPs Some dominant ISPs tend to access to monopolize and monetize their customer base by charging both content networks and Tier 1 Backbones for IP Interconnection and restricting peering capacity to enforce this This leads to quality degradation for the consumer and increased costs for content and application providers This represents a threat to innovation and an open internet.

Options 1. Long term IP Interconnection agreements that make economical sense 2. Influence regulation Influence Parliaments, EU DG s, Commissioners, Ministries, Regulators

Options 3. Create consumer awareness but works only if consumers have a choice in broadband ISPs.

LeaseWeb position LeaseWeb is a strong supporter of an open Internet in which ISPs provide uncongested Internet access to their customers and where traffic between content/applications and eyeballs in a country is exchanged on a settlement free basis, enabling innovation and competition. Policies that restrict settlement free interconnection capacity between content/applications and eyeballs in a country, or between Tier 1 networks and ISPs operating international backbones, are a threat to competition, innovation, the eyeball s Internet experience and realtime/critical IoT applications.

LeaseWeb actions 1. Keep negotiating IP Interconnection agreements that make economical sense and with some that works well! 2. Influence EU regulation through partnerships and associations. 3. Evaluating initiatives to drive consumer awareness

So @Home: >200Mbps line speeds are nice, but make sure your ISP does not restrict IP Interconnection capacity in the back (e.g. check speed indices of NetFlix/Google, check Tweakers, forums etc.). @Work: if the cost or quality of content and applications (or the underlying platforms) are at risk, step up, consider your options and take action. Please contact me if you want to team up.

Thank you! Bart van der Sloot b.vandersloot@network.leaseweb.com (join us at the LeaseWeb Tech Summit, June 2, Amsterdam, Design for Scalability http://www.techsummit.io/amsterdam/, use Promo Code MOREIP )