BBC iPlayer Bandwidth Wars
It's August; not much going on in the telcosphere. But the summer calm was shattered this week by some news -- and, despite what you'd read elsewhere, it wasn't the Ericsson/STMicro merger. We documented, with a little help from Plusnet and their happy
wurlitzer Ellacoyas, just how heavily the BBC's iPlayer TV streaming service hit British ISPs. We also noted that even if the Beeb is sucking up a lot of bandwidth, it's still not as big a deal as YouTube.
Now, it looks like a second wave of iPlayer-related disruption is heading for the British DSL providers' bottom line. And the pattern is likely to repeat itself all over the world, since you have a misalignment of interests between media players (who want free or cheap online distribution), and ISPs (who want to sell 'unlimited' plans to users in the hope they never use any of the capacity sold). The answer will inevitably be a new more dynamic market for bandwidth and content delivery. In the meantime, we can watch the old industry structures strain and buckle. So what drives the economics of online video delivery? [Ed - We will be launching a major new research report into online video delivery this autumn, more details to follow.]
As so often, economic change on the Internet is manifesting itself as a peering war, or something like one. Peered networks mean no money changes hands between telcos; otherwise you have to pay or receive money for transit. Since receiving money is good, and paying out isn't, this is core to the business model. Ma Bell grew up on the back of AT&T's leverage over smaller local telcos when it came to interconnect with the long distance network.
The BBC has been criticised on this blog for an attitude to the ISP business model crisis you could characterise as neo-brutalist: we're here with our vast video stockpile, like a massive concrete tower, and you'll just have to deal with it. But compared to what is now being suggested, the BBC's Internetworking policy under Ashley Highfield was relatively friendly.
First of all, the BBC made extensive use of content delivery networks (CDNs) to soften the blow, by caching the data nearer to users. Specifically, they contracted with Akamai Networks to outload their video content from their servers in ISP network operations centres. Secondly, the BBC encouraged direct peering between its own content network and UK eyeball ISPs, which like all peering tended to replace OPEX with CAPEX amortisation. If you're connecting up with the BBC at LINX, for example, you're almost certainly using your own equipment, so although it still costs you money, the connectivity is provided at cost. Further, once you've spent the money to run the cables, install the gear, and turn on the Ethernet port on the IX switch, you can be certain of the costs over the time it takes you to amortise them.
Here's a RIPE BGPlay visualisation of the BBC's routing table just before the Olympic games. Note how the BBC has lots of direct connections (peers), rather than going via a few intermediaries.
However, tucked away in the announcement that the BBC is going to start streaming H.264 video as well as On2 VP6, it looks like there is a major change afoot. This means a leap in the bitrate from 300Kbps to 800Kbps, and the H.264 videos are not going to be served up from Akamai, but from Level(3)'s internal CDN. This instantly raises a major issue for other ISPs. Akamai peers at all its locations -- it is, after all, the company's raison d'etre. But Level(3), in its role as a tier-one backbone operator, gets all its own reachability through peering and charges lesser beings for transit over its wires. ISPs may be faced with a whopping transit bill to reach BBC CDN servers on Level(3).
But this is only part of the change; it's also being rumoured that the BBC is itself going to terminate direct peering with downstream networks, or perhaps that it already has done "for the Olympics", so everyone will have to go via Level(3), and drop the Akamai service for non-H.264 content as well. This may mean a major disruption of the UK ISP economy. The only ISP which won't be affected is BT, being a global carrier that almost certainly peers with Level(3), and possibly Orange if their UK DSL infrastructure is integrated in France Telecom's global IP activities, as Opentransit (France Telecom's worldwide Internet backbone, AS5511) is in a similar position. This raises an interesting question.
Peering is negotiated at the level of networks, not companies -- the unit of interest is a BGP session. Are the various small ISPs that became Orange (i.e. France Telecom), O2 (i.e. Telefonica), and BT divisions in a position to benefit from Daddy's peering relationships? It would seem to be a big competitive advantage, especially if the BBC is indeed hopping into bed with Level(3), but then, British ISPs aren't an obvious example of how to integrate acquisitions. As it happens, we checked, and all the national Oranges (subsidiaries of France Telecom) are downstream peers of AS5511, which is France Telecom's global IP backbone. Telefonica's Be isn't obviously integrated in AS12956 (Telefonica Wholesale) although some small UK ISPs are. (However, they do peer with Level(3) in their own right.) It does increasingly look like you need a global telecom giant as a parent to be a viable ISP.
You have to wonder what the terms of the BBC-Level(3) contract are; in a sense, the BBC has entered into a Faustian bargain, because signing up with a tier-one network implies that its own peering activities are now in competition with theirs. Level(3) would obviously prefer more transit traffic from ISPs that it can bill for, and this new arrangement means more ISPs will have to buy transit from them to reach BBC content. Did they demand an end to direct peering with the BBC, or offer a discount in exchange for it?
But rather than just wondering, we looked up the route (126.96.36.199/16) which contains most of BBC Internet Services on RIPE BGPlay. Despite everything, there were practically no significant changes over the start of the Olympics, and the BBC was still only using Level(3) for some international transit networks. Whatever the politics, it looks like the rumours are just that. Rumours. As far as we can see, the BBC is still peering with all and sundry.
Here's another BGPlay visualisation, today. Note that there has been no wave of BBC routes announced from Level(3) (AS3356), so not much has really changed yet..
The pressure on the ISP cost base is only going to get worse. Not only will user numbers and usage keep going up, but higher video quality will multiply the total usage. And you can't expect cooperative policies from major content networks, either. In moving the H.264 video to Level(3), the BBC has stepped some of its distribution costs off to the general UK Internet community. Whether or not they intend to change their peering policies, the existence of such fears should tell you all you need to know about the possible consequences.