Net neutrality debate hammers Sandvine

The debate over Net Neutrality is beginning to have a real impact on the telecommunications market and Sandvine Inc., the acknowledged leader in providing technology traffic shaping technology to ISPs, is beginning to feel the pinch. The company's stock price has been pummelled after the Waterloo ON-based company posted disappointing quarterly revenue results last week. Sandvine's earlier predictions that it would be getting more traction in the DSL and wireless markets have also been muted. "The numbers themselves were okay," says Dushan Batrovic, an analyst at Canaccord Capital Inc. "But the fact that they pulled their guidance - we were expecting a lowering to something more manageable - suggests that the uncertainty is a lot higher than people realized."But regulators are also making noise, creating reverberations around the Internet industry. On July 11, US Federal Communications Commission (FCC) chair Kevin Martin recommended sanctions against Comcast Corp. - one of Sandvine's most important customers - for "arbitrarily" blocking Internet access without disclosing this to consumers. In Canada, the CRTC is currently studying a complaint against Bell Canada's traffic management practices.Ironically, Martin's charge that Comcast is throttling traffic regardless of demand level could just as easily have been a boost to Sandvine, given that the company's technology is designed to manage traffic more intelligently.The problem is that usage trends argue against the notion of peak traffic periods. Sandvine, which recently released a report indicating that peer-to-peer (P2P) file sharing accounts for 43.5% of consumer Internet traffic in North America (up from 40.5% last year), is seeing P2P usage becoming more distributed."You can do some modeling based on people doing things for certain periods of time," says Tom Donnelly, founder and executive VP of marketing for Sandvine, "but file sharing applications are like autonomous agents - they establish connections to different devices independent of the human driving it."What this means is that the notion of a busy period - central to many network management strategies - is becoming increasingly moot."In a way this is a good thing," says Donnelly, "because it creates more utilization of the network, and if a network has capacity that isn't being used it isn't particularly efficient."And in a way it's a bad thing, because it means that carriers will be tempted to favour blanket capping as opposed to targeting specific bandwidth-intensive applications. This is because much of the traffic management of P2P is a game of cat and mouse, in which the use of random ports makes it maddeningly difficult to know which protocols are hogging the network.As a result Comcast has embraced caps and over-use fees. Sandvine has branded this as a protocol agnostic service called "FairShare", which is a policy approach to congestion that doesn't target specific applications. It's a way for Sandvine to stay on the good side of the carriers, who themselves are getting slammed by the regulators. It's also a way to throttle P2P without specifically naming it, which puts both the vendors and the carriers one step further away from the net neutrality debate."We see the same Comcast issue in Canada with Rogers Communications and Bell Canada Enterprises," says Batrovic. "Regulators can tolerate reasonable network management, but the problem was that Comcast was targeting P2P indiscriminately. They weren't looking at congestion - they just blocked. That's why they were perceived as anti-competitive, as well as the fact that they were less than up-front, to put it mildly."The problem is that, despite suspicions on the part of consumers, regulators, and independent ISPs, many big carriers are saying the Internet is about to hit a wall - the result of P2P-delivered video. The risk is that unless carriers have the power to manage aggressively, real-time applications such as VoIP, now a critical component of many phone services, could be adversely affected."File sharing is currently the dominant mechanism for the distribution of video content," says Donnelly, "and will be for the foreseeable future. It's effective when lots of people are looking for largely similar content, but it's not effective in terms of the utilization of broadband resources. It can saturate links and crowd out other applications. In the end, it's a balancing act."And in the end, it's the regulators who need to get their act together. People can complain that carriers aren't being transparent, but there likely won't be any clarity soon, because both the CRTC and the FCC are reticent to implement hard and fast rules. When the likes of Google tell the CRTC that Bell is "unlawful" for degrading legal applications, they are effectively arguing for blanket, policy-based caps.Like it or not, according to Batrovic, that isn't about to happen any time soon. "We will move toward a ‘principles-based' as opposed to a ‘rules-based' system," he says. "This issue will continue to proceed on a case-by-case basis."

Net neutrality debate hammers Sandvine

News | July 14, 2008

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