CYBERSPACE—In a move that exemplifies for some why the Comcast-NBC Universal merger should not go through, the Philadelphia-based cable giant has made a take-it-or-leave-it offer to Colorado-based Level 3 Communications by demanding a recurring fee to transmit online movies and other content to Comcast's customers who request such content. The news drew immediate reaction from supporters of net neutrality and a brutal war of words between the two companies, which are scheduled to meet later this week to try to resolve their differences.
"On November 19, 2010, Comcast informed Level 3 that, for the first time, it will demand a recurring fee from Level 3 to transmit Internet online movies and other content to Comcast's customers who request such content,” Level 3 said in a press release issued Monday. “By taking this action, Comcast is effectively putting up a toll booth at the borders of its broadband Internet access network, enabling it to unilaterally decide how much to charge for content which competes with its own cable TV and Xfinity delivered content. This action by Comcast threatens the open Internet and is a clear abuse of the dominant control that Comcast exerts in broadband access markets as the nation's largest cable provider.”
Despite those objections, Level 3 agreed on Nov. 22 to accept the terms, under protest, “in order to ensure customers did not experience any disruptions.”
Comcast retorted immediately, posted a blistering comment to its blog that accused Level 3 of inaccurately portraying the negotiations between the two companies, and describing its position as “duplicitous.”
“What Level 3 wants is to pressure Comcast into accepting more than a twofold increase in the amount of traffic Level 3 delivers onto Comcast's network—for free,” wrote External Affairs and Public Policy Counsel Joe Waz. “In other words, Level 3 wants to compete with other CDNs, but pass all the costs of that business onto Comcast and Comcast's customers, instead of Level 3 and its customers.
“When another network provider tried to pass traffic onto Level 3 this way, Level 3 said this is not the way settlement-free peering works in the Internet world,” he continued. “When traffic is way out of balance, Level 3 said, it will insist on a commercially negotiated solution. Now, Level 3 proposes to send traffic to Comcast at a 5:1 ratio over what Comcast sends to Level 3, so Comcast is proposing the same type of commercial solution endorsed by Level 3.”
The upcoming meeting will be an opportunity to address the apparent inconsistency, added Waz. “We are happy to maintain a balanced, no-cost traffic exchange with Level 3. However, when one provider exploits this type of relationship by pushing the burden of massive traffic growth onto the other provider and its customers, we believe this is not fair.”
As far as some internet watchers are concerned, however, Comcast is attempting to flex is substantial muscles.
"This is exactly the sort of anticompetitive harm that opponents of Comcast's merger with NBC-Universal have warned would happen—that Comcast would leverage its network to harm distribution of competitive video services, while raising prices on its own customers," Harold Feld, legal director of Public Knowledge, said. "Policymakers should see this as the third strike for Comcast, following the BitTorrent complaint, the complaint by Zoom modem manufacturers over treatment of their products, and now this."
Level 3, of course, also has entered into a strategic partnership with Netflix. Earlier this month, the video delivery company announced that it was dropping Akamai in favor of Level 3, whose backbone it had used previously. There were conflicting reports from within both Netflix and Akamai about the reasons for the move, including insinuations that Netflix was disappointed with Akamai’s current video streaming performance.