Here's a question I haven't got an answer for that you might be able to help me with. Who pays whom in the following scenario?:
- A = User
- B = DSL Access Provider
- C = Transit Provider
- D = Video Portal
Obviously the user (A) pays the DSL Access Provider (B) a monthly fee for the DSL line rental
The Video Portal (D) pays the Transit Provider (C) since it sends a lot of data into the network towards the user.
Based on the business model User (A) might pay the Video Portal (D) a fee or the Video Portal is cross-financed in another way, e.g. advertising.
And here's the question: What is the business relationship between the DSL access provider (B) and the Transit Provider (C)? The majority of data exchanged flows from Transit Provider (C) to the DSL access provider (B). Who pays whom at this interface?
Any insight and references are greatly appreciated!
6 thoughts on “Who Pays Whom?: User – DSL Provider – Transit – Video Portal”
The real situation is much more complicated than that. Everyone pays for their upstream connection and at the highest level, the internet backbones, the answer is peering.
And at that level usually no-one pays.
The correct answer is that it depends.
B could be paying C (common).
B and C might have settlement free peering, so neither pay (not uncommon, depends on circumstances).
C could be paying B (rare, but happens, see for example L3 and Comcast).
B to C, though the two comments above this one are also spot-on.
I’m no expert in this area, but it seems to depend on how greedy B is. By any normal logic A pays B to provide him/her access to D’s content through C. It’s therefore up to B to incorporate the cost of interconnecting to relevant networks (such as C) into his pricing model to A. Sometimes, as has been mentioned, there’s enough reciprocal traffic between B & C to warrant a peering relationship where no real money changes hands between them.
But increasingly D bypasses C and connects to B directly through a content delivery network. And if B is particularly greedy, as is the case with Comcast, they make an argument that D should be paying to access their customers (A). AT&T’s CEO famously made some comment not too long about about the likes of D using their network “for free”. So B see’s A as a commodity to be sold to D, rather than itself as a service provider to A.
One scenario here (fibre/DSL):
A pays B
B pays C
A pays for video service (similar to cable tv)
D is own by B, the servers are located in B network. B pays for content right
For mobile video content, another scenario:
A pays B
B pays C
A and D shares revenue from B purchasing the video services
D is located in internet, A pays C
If D is available via peering, then C is out of picture
It’s not about greed. It’s about how much market power and leverage B has.
All the greed in the world is not going to help a twobit access provider in trying to charge a transit provider for bandwidth.
It only becomes feasible for B to extort payment from C once the access provider has enough end users that it becomes a problem for C if they cannot provide transit to that part of the internet.
Relevant concepts: termination monopoly, significant market power, rent seeking
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