Google goes to Washington; are carriers ready?

Corporations are moving away from those services and toward Internet-based services, which by definition are multi-carrier, particularly for remote and branch offices. That means service providers need to figure out how to make a profit from handing off Internet backbone traffic to their peers.

I’ve written several columns recently on the need for service providers to work together to create a framework for peering agreements that ensures the effective and profitable handoff of QoS-enabled traffic. The urgency just went up a notch: Carriers had better plan to tackle this issue soon, or look for Google and its peers to lobby the government to force them to do it.

Last month Google announced that it’s opening an office in Washington to lobby for, among other things, “broadband access and Internet standard-setting.” (See Bradner on telecom regulation)

Google didn’t say so directly, but you can bet it’s gotten just a teensy bit annoyed by the way peering spats between providers such as Level 3 Communications and Cogent Communications can shut down Internet access for users, as happened a few weeks ago. As noted in previous columns, Google (along with Amazon.com, eBay and the online gaming community) have the most to lose if the Internet doesn’t deliver highly reliable end-to-end service. These companies’ revenues are on the line, so expect them to take the issue of effective peering arrangements very seriously – more so than the carriers currently do.

Service providers generally negotiate Internet peering agreements on a case-by-case basis – and these agreements often date back to the days before service providers seriously considered making money from backbone Internet transport. Back then, the real money came from voice and enterprise data services.

In other words, Internet backbone services – and peering arrangements – didn’t need to be profitable, because the funding came from somewhere else. That’s why all the pure-play ISPs, such as UUNET and MFS, were bought by providers such as MCI and AT&T that offered a broader mix of services: the real profits came from on-net voice and data traffic, and carriers could subsidize unprofitable ancillary services, such as running Internet backbones, out of those profits.

Times have changed. Profit margins for voice and traditional enterprise data services are cratering, so relying on them to subsidize anything is a fool’s game. Corporations are moving away from those services and toward Internet-based services, which by definition are multi-carrier, particularly for remote and branch offices.

That means service providers need to figure out how to make a profit from handing off Internet backbone traffic to their peers. And not just any traffic: With the rise of multimedia applications (voice, video, online gaming), they must track not only the quantity of traffic but also the traffic QoS type that they’re handing off to their peers.