Analysis: Comcast and Level 3 heighten tensions in net neutrality debate

15 February 2011 |

After two months of intense public sparring between US cable operator Comcast and internet backbone provider Level 3, the companies are no closer to resolving an internet traffic payments dispute that could significantly change net neutrality principles in the region.

 Level 3 is accusing Comcast of attempting to set up a toll booth to charge for adding traffic on Comcast’s network, while Comcast argues that this is a mere peering dispute and Level 3 is trying to gain an advantage over competitors by doubling the amount of traffic sent to the network without paying for the extra capacity. Joe Waz, SVP, external affairs and public policy counsel at Comcast believes: "Level 3 is trying to gain an unfair business advantage over its CDN competitors" because of the amount of traffic it wants to shift onto the Comcast network, creating an imbalance with other content delivery network (CDN) competitors. Comcast also notes Level 3’s deal with internet video provider Netflix led to a request for 27 to 30 new interconnection ports to allow a greater volume of traffic across the Comcast network. At present, Comcast terminates Level 3’s traffic at an industry standard ratio of 2:1, but this could rise to a traffic imbalance of approximately 5:1 as a result of the Netflix deal.

"Comcast has offered Level 3 the same terms it offers to CDN competitors for the same traffic," said Waz. "Level 3 is trying to force Comcast to give Level 3 unlimited and highly imbalanced traffic and shift all the cost onto Comcast."

The carrier refutes the accusation, and claims that Comcast’s statement "could not be more misleading," arguing that increased traffic is due to higher demand by Comcast’s customers for online content which is used to transmit movies, sports and games to subscribers of the cable service.

"Level 3 believes Comcast’s position violates the spirit and the letter of the Federal Communication Commission’s (FCC) proposed internet policy principles and other regulations and statutes, as well as Comcast’s previous public statements about favouring an open internet," said Thomas Stortz, EVP at Level 3.

The net neutrality debate continues to divide opinion in the US with supporters of the principle arguing that a tiered system, which has been proposed, would allow communication companies to prioritise different types of traffic on its network and would therefore favour well-established content companies that can pay a premium. If net neutrality, the principle of ISPs treating all web traffic equally, is replaced, there is an argument that internet start-ups would struggle to compete and a tiered system would be detrimental to internet innovation.

"It is difficult to predict the outcome of the net neutrality debate and the Comcast-Level 3 issue," said Neil Ende, managing partner at Technology Law Group. "The FCC’s net neutrality rules prohibit Comcast from blocking traffic or discriminating and, subject to political changes, we expect these rules will ultimately prohibit traffic blockage. However, they will not impose specific pricing regimes, nor will the FCC be active in the enforcement process except when consumers complain or are materially harmed."

In December 2010, both parties issued letters to the FCC outlining their arguments. Level 3 has complained to the commission about Comcast’s proposed merger with NBC Universal (NBCU), which is subject to FCC review, and the company is requesting that the commission places conditions on the deal so the joint entity cannot abuse its growing power in the internet backbone space. Comcast argues, due to Level 3’s new position as a major CDN provider, that it "wants to seriously disrupt the settled economics of internet traffic to meet its business plan."

"Level 3’s attempt to interject this dispute into the NBCU transaction review is grossly improper," commented Lynn Charytan, vice president, legal regulatory affairs at Comcast.

Again, Level 3 argues the letter has many misleading, factually incorrect statements and claims Comcast’s theory that if FCC restrictions were placed on the company, it would aid Level 3’s unique position as a Tier 1 provider and a CDN, is flawed because other major operators are in the same position. "Comcast is seeking to confuse and mislead by drawing inappropriate comparisons between competitive markets," said John Ryan, chief legal officer at Level 3.

The FCC has yet to comment on the issue.