Peering/Interconnection on the Internet as a Telecom Carrier

I apologize for the long list of recipients. I'm certain many of
you will join in related discussion within your respective forums. I am
attempting to get largely the same statements/thoughts out to wide variety
of interested parties, many of which have been asking for a statement from
me or have put related material online in an effort to receive comments.
For those of you on the nanog list, this material is not strictly
operational in nature, but I feel it is sufficiently related to the
operations of the Internet to merit posting.

  The information contained herein is not proprietary information
and can be assembled through a variety of public sources. Nothing
contained herein is to my knowledge covered under any non-disclosure or
proprietary information agreements to which I am currently or have been
previously bound. What follows are some of my thoughts on the matter of
Peering/Interconnection on the Internet as a Telecommunications
Carrier/Internet Service Provider (hereafter ISP).

  For the last year I have been actively working to forge a future
as a Utility/Telecommunications Carrier for the ISP business that I
started nearly four years ago. Throughout this process I have had the
privilege of working with Mr. David Simpson of Young, Vogl, Harlick,
Wilson and Simpson LLP of San Francisco. Much of what I will discuss about
peering has been shaped by what I've learned from Mr. Simpson. Unlike Mr.
Simpson, I have no license to practice law and thus legal questions that
arise from this discussion are best forwarded to him. (His address is: Beyond my work with Mr. Simpson in this area, as a daily
matter I have been directly involved in all aspects related to the
engineering, maintenance, operations, purchasing and contract negotiations
necessary to produce Internet connectivity over multiple Internet Exchange
Points (often called NAPs or MAEs but hereafter referred to as "IXPs") for
the last two years.

  Universal reachability is a fundamental tenet in public networks.
It is assumed that if you the customer pay for a connection to a public
network all points within that public network are reachable by you the
customer. This is true of both the Internet and the more traditional
Public Switched Telephone Network (hereafter referred to as the "PSTN").
As most of us know, these networks are not single entities but are
comprised of many networks that connect together and cooperate to produce
universal reachability. To do this they must interconnect and exchange
their respective traffic. The notion of "free peering" is directly
analogous to a "bill & keep" interconnection relationship between
traditional telephone companies, pursuant to which Carrier A agrees to
accept and terminate - at no charge - all of the traffic originating on
Carrier B's network which is destined to Carrier A's customers in return
for Carrier B accepting and terminating - at no charge - all of the
traffic originating on Carrier A's network which is destined for customers
of Carrier B. The other method of interconnection between Common Carriers
is called "reciprocal billing". It works the same as the relationship
above except replace the phrase -for a negotiated sum- for the phrase
-at no charge- . In the Internet we would call "reciprocal billing"

  In this age of telecommunications deregulation, it is very common
for there to be significant differences in the size of networks during the
phase when one carrier is the incumbent and other carriers are entering
the market. It has been argued for years (often by these new networks)
that the public is better served by a competitive marketplace and that
given the impact of the incumbency of some networks certain inequities
between the new networks and the incumbents will need to be accepted for a
period of time, in order for that competitive marketplace to emerge in a
meaningful way. As a practical/business matter, it is logical "free
peering"/"bill & keep" interconnection relationships are formed when there
are not substantial differences in the associated costs for Carrier A and
Carrier B. However it is common that there are substantial differences in
these costs for some period of time and they are either negotiated with
money or time until parity can be achieved or new negotiations take place.
Most importantly, as with other Utility interconnection issues, there
exists an established non-discriminatory framework for these negotiations
and the resulting interconnection agreements with time limits for specific
phases, procedures for arbitration, required public disclosure and
regulatory approval for the outcome.

  In the context of peering, many mid sized ISPs have currently or
have been willing to build out their networks to exchange traffic with the
largest networks in multiple geographically diverse points only to find
that these larger networks will neither exchange traffic once these
competitive networks have arrived at these points, nor will these large
network operators even disclose under what criteria they would exchange
traffic over these geographically diverse points. This refusal even to
make public their criteria for interconnection is at the heart of a very
serious threat to the continued growth and openly competitive nature of
the Internet. It is also, as discussed below, illegal.

  Under the Communications Act of 1934 As amended by the
Telecommunications Act of 1996 ("Act"), "telecommunications carriers" are
under obligation to interconnect "with the facilities and equipment of
other telecommunications carriers..." (Act, Sec. 251 (a) (1). A companion
obligation under Section 251 (a) of the act is to "refrain from installing
network features or functions that violate the guidelines and standards of
Section 256 of the Act". Section 256 mandates "non-discriminatory
accessibility by the broadest number of users and venders of
communications products and services to public telecommunications networks
used to provide telecommunications service." In Section 3 (43) In The
term "telecommunications", as used in the Act means "the transmission,
between or among points specified by the user, of information of the
user's choosing, without change in the form or content of the information
as sent and received". On a State level, the California Public Utilities
Commission (hereafter "CPUC) has made clear on numerous occasions that
public telecommunications utilities must provide reasonable,
non-discriminatory interconnection to other telecommunications carriers.
(See, e.g. Decision No. 95-12-056 at page 16 issued in the CPUC's local
competition proceeding, R. 95-04-043/I.95-04- 044 "We will review
proposed interconnection contracts for unfair discriminatory terms and
will deny approval or direct parties to renegotiate any unfairly
discriminatory or otherwise unreasonable terms where necessary".

  The conduct of certain telecommunications carriers with regard to
these current peering/interconnection issues also raise broader legal
questions of Anti-Trust. This is true, especially given that the most
anti-competitive of these Carriers are the very same telecommunications
Carriers that own and operate the IXPs in which most of the public and
private interconnection/peering takes place. This is a situation directly
analogous to the control of and manipulation of costs and flows in railway
switching yards during an earlier "industrial" revolution. The behavior of
the owners and operators of these yards were an integral part of the
reasoning behind the creation of Anti-Trust Law in the first place. There
too economic justifications were made for the discriminatory and anti-
competitive behavior of large business combinations.

  The key to non-discrimination and open competition is disclosure.
By definition, the non-disclosure of peering/interconnection requirements
and agreements, especially the non-disclosure and fair application of
criteria for establishing or maintaining peering between networks is the
engine of this discriminatory and anti-competitive behavior. Many of us in
this industry have heard for years from the largest networks in our
business that they will not establish/maintain peering with our networks
nor will they disclose their criteria for establishing or continuing
peering. It is largely for this reason that I confess, I am a proponent of
some level of regulation in the Internet as soon as possible. I think
this minimal level of regulation is critical to the Internets open and
unrestricted development. As an entrepreneur and a professional in this
industry, I urge some minimal level of immediate regulation such that the
application of accepted telecommunications law and practices are upheld.
If they are not, I fear we will suffer the consequences of the
accumulation of all the economic power over the Internet in to a very
small number of hands. To me this is a very big problem, perhaps one even
worth losing your job over.

  As these issues unfold there are several arguments that will be
used by those that resist what I am suggesting and I'd like to address
them forthwith. As with all good arguments there is some truth in what is
said by those that see this issue differently. I submit that the facts are
being manipulated to mislead the public, obscure the anti-competitive
motives and cover-up the refusal to abide by the law which calls for
non-discriminatory interconnection. By way of example.

  1) It has been said that some ISPs are "looking for a free ride".
This may be true of a few, though I know of none. The more relevant fact
is that there are scores of mid-sized ISPs that are willing to pay or are
currently paying all the costs required for interconnection at current or
future traffic levels between them and those that claim that they are
"looking for the free ride".

  2) As ridiculous as it sounds I have heard it said that "Internet
Traffic is not telecommunications, it is rather an "Enhanced Service".
This is particularly absurd in the light of the Telecom Acts definition of
"telecommunications", which, as quoted above, by its own broad terms,
easily covers Internet traffic.

  3) I have heard that in order to negotiate these
interconnection/peering agreements it is necessary to enter into highly
restrictive long term non-disclosure arrangements. The history behind the
negotiation of interconnection does not support this view. To the
contrary, this practice of enforcing "secrecy" will only result in
discriminatory results.

  4) It is argued by the largest ISPs that they are not
Telecommunications Carriers and therefore under no obligation to
interconnect with other ISPs, who likewise are not Carriers under the
Telecom Act. This argument lacks merit for two reasons. First the large
ISPs making this argument are themselves wholly owned subsidiaries of
self-acknowledged, FCC-licensed carriers. These ISPs are fully-integrated
technically, financially, personnel-wise and infrastructure-wise, into
their Telecom corporate parent. No regulatory agency in the country would
accept the fiction that the ISP "business" of the carrier is somehow
separate and distinct from the telecommunications business of that same
carrier. And, of course, from a marketing perspective, all these carriers
are billing their Internet services as merely one element of their
bundled, integrated service offerings. Second, the "you're not a carrier"
argument can't apply to Whole Earth, because it is a licensed carrier - it
has a Certificate of Public Convenience and Necessity (just like Pacific
Bell/TCG, etc.) to provide facilities-based local and long-distance
telecommunications services. Even if we didn't have this particular status
it seems clear that the definition of Carrier within the Telecom Act
(above) would include all ISPs.

On a personal note, as some of you are aware there has been some turmoil
over these issues for me and for Whole Earth Networks LLC. Words alone are
not sufficient to express the appreciation I have for the support I have
received from the employees, customers, friends and other industry
professionals over these tumultuous days. Recently the ownership too has
been more supportive. I am beholden to all of you and simply can't express
how deeply appreciative I am. These extraordinary circumstances have
produced such unqualified support and admiration of my efforts in this
area that I have been moved to tears on more than one occasion. I am
thankful to the employees of Whole Earth for their commitment to stay at
work and produce the services that we are all proud of. I remain convinced
that Whole Earth Networks LLC is a Company with a bright future and I
endeavor to ensure that future.

David S. Holub