Level 3 offered to pay for all of the time and materials to upgrade
the peering point with Verizon. Verizon refuses because they want a
larger recurring payment from Netflix.
Verzion refuses because they want a larger recurring payment.
Ultimately Verizon couldn't really care if it's from Netflix or Level3.
I'm guessing Verizon and L3 have got a SFP (settlement free peering - no
$) agreement in place already, and L3 doesn't want to change that (since
it's where their profit margin is).
They'd gladly give a one-time fee (ie: equipment) for a quick fix since
it means Netflix would end up paying Level3 more money as usage levels
would increase once the bottleneck is removed (assuming a standard usage
based fee structure). Verizon gets stuck footing the ongoing costs
everywhere else without getting anything in return.
You might say that the real problem is not Verizon and Netflix, but
Level3 refusing to give their customer (Netflix) good connectivity to
Verizon. All they need to do is buy a (large) circuit from Verizon and
problem is solved. (although their profit margin might suffer).
R.
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