December 14, 2017

Archives for 2010

Court Rules Email Protected by Fourth Amendment

Today, the United States Court of Appeals for the Sixth Circuit ruled that the contents of the messages in an email inbox hosted on a provider’s servers are protected by the Fourth Amendment, even though the messages are accessible to an email provider. As the court puts it, “[t]he government may not compel a commercial ISP to turn over the contents of a subscriber’s emails without first obtaining a warrant based on probable cause.”

This is a very big deal; it marks the first time a federal court of appeals has extended the Fourth Amendment to email with such care and detail. Orin Kerr calls the opinion, at least on his initial read, “quite persuasive” and “likely . . . influential,” and I agree, but I’d go further: this is the opinion privacy activists and many legal scholars, myself included, have been waiting and calling for, for more than a decade. It may someday be seen as a watershed moment in the extension of our Constitutional rights to the Internet.

And it may have a more immediate impact on Capitol Hill, because in its ruling the Sixth Circuit also declares part of the Stored Communications Act (SCA) of the Electronic Communications Privacy Act unconstitutional. 18 U.S.C. 2703(b) allows the government to obtain email messages with less than a search warrant. This section has been targeted for amendment by the Digital Due Process coalition of companies, privacy groups, and academics (I have signed on) for precisely the reason now attacked by this opinion, because it allows warrantless government access to communications stored online. I am sure some congressional staffers are paying close attention to this opinion, and I hope it helps clear the way for an amendment to the SCA, to fix a now-declared unconstitutional law, if not during the lame duck session, then early in the next Congressional term.

Update: Other reactions from Dissent and the EFF.

Two Stories about the Comcast/Level 3 Dispute (Part 2)

In my last post I told a story about the Level 3/Comcast dispute that portrays Comcast in a favorable light. Now here’s another story that casts Comcast as the villain.

Story 2: Comcast Abuses Its Market Power

As Steve explained, Level 3 is an “Internet Backbone Provider.” Level 3 has traditionally been considered a tier 1 provider, which means that it exchanges traffic with other tier 1 providers without money changing hands, and bills everyone else for connectivity. Comcast, as a non-tier 1 provider, has traditionally paid Level 3 to carry its traffic to places Comcast’s own network doesn’t reach directly.

Steve is right that the backbone market is highly competitive. I think it’s worth unpacking why this is in a bit more detail. Let’s suppose that a Comcast user wants to download a webpage from Yahoo!, and that both are customers of Level 3. So Yahoo! sends its bits to Level 3, who passes it along to Comcast. And traditionally, Level 3 would bill both Yahoo! and Comcast for the service of moving data between them.

It might seem like Level 3 has a lot of leverage in a situation like this, so it’s worth considering what would happen if Level 3 tried to jack up its prices. There are reportedly around a dozen other tier 1 providers that exchange traffic with Level 3 on a settlement-free basis. This means that if Level 3 over-charges Comcast for transit, Comcast can go to one of Level 3’s competitors, such as Global Crossing, and pay it to carry its traffic to Level 3’s network. And since Global Crossing and Level 3 are peers, Level 3 gets nothing for delivering traffic to Global Crossing that’s ultimately bound for Comcast’s network.

A decade ago, when Internet Service Retailers (to use Steve’s terminology) were much smaller than backbone providers, that was the whole story. The retailers didn’t have the resources to build their own global networks, and their small size meant they had relatively little bargaining power against the backbone providers. So the rule was that Internet Service Retailers charged their customers for Internet access, and then passed some of that revenue along to the backbone providers that offered global connectivity. There may have been relatively little competition in the retailer market, but this didn’t have much effect on the overall structure of the Internet because no single retailer had enough market power to go toe-to-toe with the backbone providers.

A decade of consolidation and technological progress has radically changed the structure of the market. About 16 million households now subscribe to Comcast’s broadband service, accounting for at least 20 percent of the US market. This means that a backbone provider that doesn’t offer fast connectivity to Comcast’s customers will be putting themselves at a significant disadvantage compared with companies that do. Comcast still needs access to Level 3’s many customers, of course, but Level 3 needs Comcast much more than it needed any single Internet retailer a decade ago.

Precedent matters in any negotiated relationship. You might suspect that you’re worth a lot more to your boss than what he’s currently paying you, but by accepting your current salary when you started the job you’ve demonstrated you’re willing to work for that amount. So until something changes the equilibrium (like an competing job offer), your boss has no particular incentive to give you a raise. One strategy for getting a raise is to wait until the boss asks you to put in extra hours to finish a crucial project, and then ask for the raise. In that situation, not only does the boss know he can’t lose you, but he knows you know he can’t lose you, and therefore aren’t likely to back down.

Comcast seems to have pursued a similar strategy. If Comcast had simply approached Level 3 and demanded that Level 3 start paying Comcast, Level 3 would have assumed Comcast was bluffing and said no. But when Level 3 won the Netflix contract, Level 3 suddenly needed a rapid and unexpected increase in connectivity to Comcast. And Comcast bet, correctly as it turned out, that Level 3 was so desperate for that additional capacity that it would have no choice but to pay Comcast for the privilege.

If Comcast’s gambit becomes a template for future negotiations between backbone providers and broadband retailers, it could represent a dramatic change in the economics of the Internet. This is because it’s much harder for a backbone provider to route around a retailer than vice versa. As we’ve seen Comcast can get to Level 3’s customers by purchasing transit from some other backbone provider. But traffic bound for Comcast’s residential customers have to go through Comcast’s network. And Level 3’s major customers—online content providers like Netflix—aren’t going to pay for transit services that don’t reach 20 percent of American households. So Level 3 is in a weak bargaining position.

In the long run, this could be very bad news for online businesses like Netflix, because its bandwidth costs would no longer be constrained by the robust competition in the backbone market. Netflix apparently got a good deal from Level 3 in the short run. But if a general practice emerges of backbone providers paying retailers for interconnection, those costs are going to get passed along to the backbone providers’ own customers, e.g. Netflix. And once the precedent is established that retailers get to charge backbone providers for connectivity, their ability to raise prices may be much less constrained by competition.

Conclusions

So which story is right? If I knew the answer to that I wouldn’t have wasted your time with two stories. And it’s worth noting that these stories are not mutually exclusive. It’s possible that Comcast has been looking for an opportunity to shift the balance of power with its transit providers, and the clumsiness of Level 3’s CDN strategy gave them an opportunity to do so in a way that minimizes the fallout.

One sign that story #2 might be wrong is that content providers haven’t raised much of a stink. If the Comcast/Level 3 dispute represented a fundamental shift in power toward broadband providers, you’d expect the major content providers to try to form a united front against them. Yet there’s nothing about the dispute on (for example) the Google Public Policy blog, and I haven’t seen any statements on the subject from other content providers. Presumably they’re following this dispute more closely than I am, and understand the business issues better than I do, so if they’re not concerned that suggests maybe I shouldn’t be either.

A final thought: one place where I’m pretty sure Level 3 is wrong is in labeling this a network neutrality dispute. Although the dispute was precipitated by Netflix’s decision to switch CDN providers, there’s little reason to think Comcast is singling out Netflix traffic for special treatment. In story #1, Comcast is be happy to deliver Netflix (or any other) content via a well-designed CDN; they just object to having their bandwidth wasted. In story #2, Comcast’s goal is to collect payments for all inbound traffic, not just traffic from Netflix. Either way, Comcast hasn’t done anything that violates leading network neutrality proposals. Comcast is not, and hasn’t threatened to, discriminate against any particular type of traffic. And no, declining to upgrade a peering link doesn’t undermine network neutrality.

Two Stories about the Comcast/Level 3 Dispute (Part 1)

Like Steve and a lot of other people in the tech policy world, I’ve been trying to understand the dispute between Level 3 and Comcast. The combination of technical complexity and commercial secrecy has made the controversy almost impenetrable for anyone outside of the companies themselves. And of course, those who are at the center of the action have a strong incentive to mislead the public in ways that makes their own side look better.

So building on Steve’s excellent post, I’d like to tell two very different stories about the Level 3/Comcast dispute. One puts Level 3 in a favorable light and the other slants things more in Comcast’s favor.

Story 1: Level 3 Abuses Its Customer Relationships

As Steve explained, a content delivery network (CDN) is a network of caching servers that help content providers deliver content to end users. Traditionally, Netflix has used CDNs like Akamai and Limelight to deliver its content to customers. The dispute began shortly after Level 3 beat out these CDN providers for the Netflix contract.

The crucial thing to note here is that CDNs can save Comcast, and other broadband retailers, a boatload of money. In a CDN-free world, content providers like Netflix would send thousands of identical copies of its content to Comcast customers, consuming Comcast’s bandwidth and maybe even forcing Comcast to pay transit fees to its upstream providers.

Akamai reportedly installs its caching servers at various points inside the networks of retailers like Comcast. Only a single copy of the content is sent from the Netflix server to each Akamai cache; customers then access the content from the caches. Because these caches are inside Comcast’s network, they never require Comcast to pay for transit to receive them. And because there are many caches distributed throughout Comcast’s network (to improve performance), content delivered by them is less likely to consume bandwidth on expensive long-haul connections.

Now Level 3 wants to enter the CDN marketplace, but it decides to pursue a different strategy. For Akamai, deploying its servers inside of Comcast’s network saves both Comcast and Akamai money, because Akamai would otherwise have to pay a third party to carry its traffic to Comcast. But as a tier 1 provider, Level 3 doesn’t have to pay anyone for connectivity, and indeed in many cases third parties pay them for connectivity. Hence, placing the Level 3 servers inside of the Level 3 network is not only easier for Level 3, but in some cases it might actually generate extra revenue, as Level 3’s customers have to pay for the extra traffic.

This dynamic might explain the oft-remarked-upon fact that Comcast seems to be simultaneously a peer and a customer of Level 3. Comcast pays Level 3 to carry traffic to and from distant networks that Comcast’s own network does not reach—doing so is cheaper than building its own worldwide backbone network. But Comcast is less enthusiastic about paying Level 3 for traffic that originates from Level 3’s own network. (known as “on-net” traffic)

And even if Comcast isn’t paying for Level 3’s CDN traffic, it’s still not hard to understand Comcast’s irritation. When two companies sign a peering agreement, the assumption is typically that each party is doing roughly half the “work” of hauling the bits from source to destination. But in this case, because the bits are being generated by Level 3’s CDN servers, the bits are traveling almost entirely over Comcast’s network.

Hauling traffic all the way from the peering point to Comcast’s customers will consume more of Comcast’s network resources than hauling traffic from Akamai’s distributed CDN servers did. And to add insult to injury, Level 3 apparently only gave Comcast a few weeks’ notice of the impending traffic spike. So faced with the prospect of having to build additional infrastructure to accommodate this new, less efficient method for delivering Netflix bits to Comcast customers, Comcast asked Level 3 to help cover the costs.

Of course, another way to look at this is to say that Comcast (and other retailers like AT&T and Time Warner) brought the situation on themselves by over-charging Akamai for connectivity. I’ve read conflicting reports about whether and how much Comcast has traditionally charged Akamai for access to its network (presumably these details are trade secrets), but some people have suggested that Comcast charges Akamai for bandwidth and cabinet space even when their servers are deep inside Comcast’s own network. If that’s true, it may be penny wise and pound foolish on Comcast’s part, because if Akamai is not able to win big customers like Netflix, then Comcast will have to pay to haul that traffic halfway across the Internet itself.

In my next post I’ll tell a different story that casts Comcast in a less flattering light.