Free Market Follies on the Internet

Hopefully, those who still evangelize over the virtues of free markets on a global scale enabled by Internet connectivity will find an object lesson in a report that Associated Press Technology Writer Peter Svensson filed yesterday:

Now and then, Internet companies indulge in what Zmijewski calls playing "chicken." If they're fighting over a contract, they disconnect each other, and wait to see who blinks first. The number of irate customers each company faces will probably determine who does.

David Schaeffer, chief executive of Washington-based Cogent, said the two companies had a "peering" contract, under which they exchanged traffic from each other's customers, with neither company paying the other for access. But TeliaSonera continuously breached the terms of the contract by not exchanging traffic in certain locations, and refusing to upgrade connections that were saturated, Schaeffer said.

That forced Cogent traffic to take long detours, according to Schaeffer. For instance, it sometimes had to carry data from a Cogent customer in Europe across the Atlantic to the U.S., then hand it over to TeliaSonera, which carried it back across the Atlantic to its European destination.

Cogent cut its direct links to TeliaSonera on March 13. For a while, customers of the two companies were still able to connect indirectly, through intermediaries connected to Cogent and TeliaSonera, but that possibility disappeared on Friday, according to Renesys

Schaeffer said the loss of alternate routes had nothing to do with Cogent, and speculated that TeliaSonera has refused to pay other providers for traffic destined for Cogent.

TeliaSonera did not comment on that allegation. Spokeswoman Maria Hillborg said the companies were trying to work out an agreement, and that a "requisite for that agreement is that TeliaSonera receives the compensation Cogent owes us."

Schaeffer denied that the companies were in negotiations.

The most important lesson that James Burke taught in his Connections programs for Public Television is that the systems we rely on the most are usually far more vulnerable than we think. Every now and then those systems drop us a little reminder: The first one I took seriously came when I experienced the Great Northeast Power Failure as an undergraduate in the Boston/Cambridge area. The Internet is one of those systems; and this is not the first "little reminder." There was, after all, a major connectivity breakdown at the end of January, which impacted the heart of the outsourcing industry in India. However, as far as we can tell, that problem was an unfortunate accident, while this one is a consequence of a dispute between two businesses that would rather play "chicken" than resolve their differences ("like adults," as some of my grade school teachers would probably have said). So much for those evangelists who preach that the Internet is "above" such matters as questions of conduct and governance!