Network Neutrality Revisited: Level 3 Complaint & Comcast Response

Level 3 Communications Complains about Comcast's excess charges for video content delivery:

Level 3 Communications Inc., a Broomfield, CO based Internet backbone company ("carriers carrier") complained Monday November 29th that Comcast Corp. is charging it an unfair fee for the right to send streaming video and other large data files to its subscribers.  The company said it agreed to pay "under protest" to avoid service disruption.

Level 3, recently partnered with Netflix to deliver the latter's very popular video streaming service (on- line movies and archived TV shows) to broadband Internet subscribers.  Level 3 helps Netflix improve online video delivery by navigating it over less congested Web routes. It said earlier this month it would need to boost its own network capacity due to its deal with Netflix, which accounts for about 20 percent of primetime U.S. Internet traffic (more than either You Tube or Hulu or other on-line video content provider).

Is this not Bit Torrent deja vu?   The Level 3 complaint comes two years after  the 2008 FCC decision for Comcast to stop slowing and blocking its subscribers from accessing an online file-sharing service called Peer-to-Peer from BitTorrent.  That P2P service enabled broadband Internet subcribers to swap movies and other huge files over Comcast's Internet connection.  A Federal Court subsequently overturned the FCC decision and questioned the FCC's authority to regulate Internet Service Providers and impose any net neutrality rules.

Here is Level 3's statement complaining about Comcast which is attributed to Thomas Stortz, Chief Legal Officer of Level 3 (not clear who it was intended for other than an open letter to the general public):

“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. 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.

On November 22, after being informed by Comcast that its demand for payment was ‘take it or leave it,’ Level 3 agreed to the terms, under protest, in order to ensure customers did not experience any disruptions.

Level 3 operates one of several broadband backbone networks, which are part of the Internet and which independent providers of online content use to transmit movies, sports, games and other entertainment to consumers. When a Comcast customer requests such content, for example an online movie or game, Level 3 transmits the content to Comcast for delivery to consumers.

Level 3 believes Comcast’s current position violates the spirit and letter of the FCC’s proposed Internet Policy principles and other regulations and statutes, as well as Comcast’s previous public statements about favoring an open Internet.

While the network neutrality debate in Washington has focused on what actions a broadband access provider might take to filter, prioritize or manage content requested by its subscribers, Comcast’s decision goes well beyond this. With this action, Comcast is preventing competing content from ever being delivered to Comcast’s subscribers at all, unless Comcast’s unilaterally-determined toll is paid – even though Comcast’s subscribers requested the content. With this action, Comcast demonstrates the risk of a ‘closed’ Internet, where a retail broadband Internet access provider decides whether and how their subscribers interact with content.

It is our hope that Comcast’s senior management, for whom we have great respect, will closely consider their position on this issue and adopt an approach that will better serve Comcast and Comcast’s customers.

While Comcast’s position is regrettable, Level 3 remains open and willing to work through these issues with Comcast. However, Level 3 does not seek any ‘special deals’ or arrangements not generally available to other Internet backbone companies.

Given Comcast’s currently stated position, we are approaching regulators and policy makers and asking them to take quick action to ensure that a fair, open and innovative Internet does not become a closed network controlled by a few institutions with dominant market power that have the means, motive and opportunity to economically discriminate between favored and disfavored content.“

http://www.businesswire.com/news/home/20101129006456/en/Level-3-Communications-Issues-Statement-Comcast%E2%80%99s-Actions

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Opinions:  John Ryan, a Level 3 legal official told Reuters the fee Comcast was asking was unprecedented. "Prior to Comcast's demand, no other broadband access provider had demanded a toll in order to increase interconnection capacity," Ryan said.  One source in the content delivery network industry said it is unusual but "not unheard of" for a last mile provider to charge for connectivity."

Here is Comcast's Response to Level 3 Charges:

Comcast's statement, attributable to Joe Waz, Senior Vice President for External Affairs and Public Policy Counsel, Comcast Corporation:

“Level 3 has misportrayed the commercial negotiations between it and Comcast. This has nothing to do with Level 3’s desire to distribute different types of network traffic. Comcast has long established and mutually acceptable commercial arrangements with Level 3’s Content Delivery Network (CDN)competitors in delivering the same types of traffic to our customers.

Comcast offered Level 3 the same terms it offers to Level 3’s CDN competitors for the same traffic. But Level 3 is trying to undercut its CDN competitors by claiming it’s entitled to be treated differently and trying to force Comcast to give Level 3 unlimited and highly imbalanced traffic and shift all the cost onto Comcast and its customers.

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. In other words, Level 3 wants to compete with other CDNs, but pass all the costs of that business on Comcast and Comcast’s customers, instead of Level 3 and its customers.

Level 3’s position is duplicitous. 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. 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. Comcast is meeting with Level 3 later this week for that purpose.

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. To use Level3’s own words:

'To be lasting, business relationships should be mutually beneficial. In cases where the benefit we receive is in line with the benefit we deliver, we will exchange traffic on a settlement-free basis. Contrary to [other ISPs] public statements, reasonable, balanced, and mutually beneficial agreements for the exchange of traffic do not represent a threat to the Internet. They don’t represent a threat to anyone other than those trying to get a free ride on someone else’s network.’”

http://blog.comcast.com/2010/11/comcast-comments-on-level-3.html

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Who are the Regulators that can rule on this dispute?

With the FCC's rule of the Internet questioned by Federal Court, who can make a ruling on this case?  The Justice Department?The Commerce Dept?  Give me a break- they don't know anything about telecom  If regulators sided with Level 3 in this case, it could potentially have ramifications for Comcast's proposed NBC Universal deal, which is being reviewed for anti-trust concerns. Comcast previously stated that it expects approval of the NBC Universal deal by year-end.  That deal is being reviewed by the FCC, which declined comment on the statement from Level 3.  If Comcast does acquire NBC Universal it will own a whole lot of video content.  Do you think the company might charge more, block or slow down on-line content transmitted from competitive content delivery companies to protect its vested interests?

The FCC is scheduled to meet on December 21, with 'net neutrality' said to be at the top of its agenda.  Why not meet on Christmas Day instead?  The results would likely be the same- nada!

0 thoughts on “Network Neutrality Revisited: Level 3 Complaint & Comcast Response

  1. When viewed in conjunction with the recent <a href="http://www.multichannel.com/article/460326-Dish_Disconnects_CSN_California_After_Losing_Arbitration_Decision.php" target=_blank>DishTV rejection of arbitration</a> of the Comcast Sports Network here in the Bay Area, it almost seems like a one-two punch.  There have long been concerns about the vertical integration of content production/ownership, which is exemplified by the DishTV news.  

    This story, where the content owner has the potential to charge "a toll" for content against competitors, is what Net Neutrality advocates have been fearing for years. 

    Dave Burstein, who follows these things much closer than I do, suggested in an email tonight, that, "As far as I know, no primary backbone provider like Level 3 has ever been required to pay to deliver traffic to another major carrier."  

    It will be interesting to see where this goes and the political ramifications given a lame duck Congress and a interesting climate in Washington D.C.  

    As a bit of background, on Net Neutrality, here is a link to a post I wrote after hearing then FCC Chairman Michael Powell reiterate Net Neutrality principles at the 2005 VON conference.  

    <a href="http://www.viodi.com/newsletter/050301/article1.htm#freedom" target=_blank>http://www.viodi.com/newsletter/050301/article1.htm#freedom</a>.

  2. Thanks Ken, for your very enlightening comment and links to other articles.

    I'm afraid the entire U.S. government is in a state of grid lock, especially in light of Republican's now controlling the House of Representatives, gaining seats in the Senate and winning more state governorships.

    And the FCC is being deprived of its broadband Internet regulatory role and has to re-invent itself to regain decision making clout.

  3. NY Times seems to corroborate the author's concerns:
    In theory, without government action, Comcast could speed up streams of NBC programs and slow down streams of its rivals’ programs. “This may be one of those teaching moments for consumers to understand what’s at stake,” said Michael McGuire, a media analyst for Gartner.
    There is no known case of Comcast ever slowing the traffic to one of its direct competitors, but it did delay some peer-to-peer file traffic in a much-litigated case several years ago. Comcast says it supports an open Internet — but also says that it needs to be able to manage its expensive and still-evolving networks, which are essentially on- and off-ramps to the Internet.
    If nothing else, the dispute demonstrates that consumers have little, if any, idea how convoluted it can be to transmit video to a computer or mobile phone.
    Nonetheless, on Monday night, public interest groups that have steadfastly opposed the combination of Comcast and NBC Universal argued that the Level 3 case proved that Comcast would discriminate against competitors if it could.
    “On its face, this is the sort of toll booth between residential subscribers and the content of their choice that a net neutrality rule is supposed to prohibit,” said Harold Feld, legal director of one such group, Public Knowledge, in a statement.
    http://mediadecoder.blogs.nytimes.com/2010/11/29/netflix-partner-says-comcast-toll-threatens-online-video-delivery/?ref=business

    1. Washington Post also think regulators will ask for concessions if Comcast acquires NBC Universal studios:
      Regulators are also expected to demand that Comcast agree not to withhold NBC shows and movies from new Internet competitors such as Google TV and Apple TV, said the sources, who spoke on the condition of anonymity because they were not authorized to discuss the matter publicly.
      Level 3's complaint also comes as the Federal Communications Commission prepares to issue more-formal rules that would force broadband providers to treat all content equally. The agency's authority over network operators was cast in doubt by a federal appeals court ruling in April.
      The FCC declined to comment Monday. A Justice Department spokeswoman was not immediately available to comment.
      Public interest groups held up Level 3's claims as evidence that Comcast's proposed merger with NBC Universal could hurt competition and consumers.
      "This case clearly establishes that Comcast is engaging in grossly anti-competitive conduct and is a serial violator of the FCC's net-neutrality policies," said Derek Turner, a research director at public interest group Free Press. "Despite its calls for self-regulation, Comcast has demonstrated time and again that it will push the boundaries of the law without any concern for how its actions harm consumers."
      Separately, Zoom, the nation's second-largest maker of retail modems, filed a complaint to the FCC on Monday saying that Comcast has unfairly imposed requirements that make it harder to compete with the cable company, which rents modems to its 17 million high-speed Internet customers.
      http://www.washingtonpost.com/wp-dyn/content/article/2010/11/29/AR2010112906825.html

  4. Zoom Telephonics Complaint:  "Trying to Gain an Unfair Business Advantage"

    Zoom Telephonics' (www.zoomtel.com/) says Comcast has implemented a modem-testing regime that has nothing to do with ensuring its systems are not harmed by customer modems. It alleges that Comcast instead is focusing on things such as a modem's weight, labeling and packaging as well as its physical appearance following the application of various substances, such as waxes. It also charges Comcast with requiring cable modem manufacturers to pay a fee for Comcast personnel to conduct site inspections at the manufacturer's facility, with business-class airfare and expensive hotels also paid for by the manufacturer.

    Opinion:  Zoom's gripe, combined with Level 3's complaint will certainly not help Comcast get approval for its proposed acquisition of NBC Universal.  The anti-trust regulators are sure to take note of these complaints.
    See full article from DailyFinance: http://srph.it/gxAnwT
     

  5. FCC Chairman's REMARKS ON PRESERVING INTERNET FREEDOM AND OPENNESS

     

    "First, consumers and innovators have a right to know basic information about broadband service,
    like how networks are being managed. The proposed framework therefore starts with a
    meaningful transparency obligation, so that consumers and innovators have the information they
    need to make smart choices about subscribing to or using a broadband network, or how to
    develop the next killer app. Sunshine can help solve problems early, reducing the number of
    issues that even come to the FCC.

    Second, consumers and innovators have a right to send and receive lawful Internet traffic — to go
    where they want and say what they want online, and to use the devices of their choice. Thus, the
    proposed framework would prohibit the blocking of lawful content, apps, services, and the
    connection of non-harmful devices to the network.

    Third, consumers and innovators have a right to a level playing field. No central authority, public
    or private, should have the power to pick which ideas or companies win or lose on the Internet;
    that’s the role of the market and the marketplace of ideas. And so the proposed framework
    includes a bar on unreasonable discrimination in transmitting lawful network traffic.
    The proposed framework also recognizes that broadband providers must have the ability and
    investment incentives to build out and run their networks. Universal high-speed Internet access is
    a vital national goal that will require very substantial private sector investment in our 21st century
    digital infrastructure. For our global competitiveness, and to harness the opportunities of
    broadband for all Americans, we want world-leading broadband networks in the United States
    that are both the freest and the fastest in the world.

    To this end, broadband providers need meaningful flexibility to manage their networks — for
    example, to deal with traffic that’s harmful to the network or unwanted by users, and to address
    the effects of congestion. Reasonable network management is an important part of the proposal,
    recognizing that what is reasonable will take account of the network technology and architecture
    involved."                            

    http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-303136A1.pdf                                         

  6. I wonder if there is another angle that will encourage Comcast and Level 3 to come to an agreement.  That is, say the worse case happens and Netflix is no longer available for Comcast customers, would there be a a "Truth in Advertising" issue?.  

    All of the advertisements for Comcast definitely imply that one will get the entire Internet and at much greater speeds than the alternatives.  Not having Netflix would leave a huge hole.  

    Granted, there would be a huge sucking sound of customers from Comcast's broadband pipe and the screaming cries of disgruntled customers who couldn't leave, if Netflix were no longer available via Comcast.  Plus, if it brought the FTC sniffing for "Truth in Advertising" violations that couldn't be good.  This outcome could present a huge public relations nightmare and potentially large financial hit for Comcast.  

  7. The issues here are not all that new.  The US Supreme Court ruled on somewhat similar situation in United States v. Paramount Pictures, Inc., 334 US 131 (1948).  It took 10 years to for it to work its way through the courts and it resulted in the dissolution of the ownership of theaters by the studios.  There is a reasonably good summary of the case on Wikipedia.  See: http://en.wikipedia.org/wiki/United_States_v._Paramount_Pictures,_Inc.
    It would be good to see this issue follow the same course, but then getting issues like this prosecuted for anti-trust is a very political issue and the makeup of the court is far different now that it was then.

  8. The FCC seems toothless and  very weak in letting Comcast get away with all these complaints.
    Thanks for bring it to our attention in such a clear and informative article

  9. For more point counter-point between Comcast and Level 3, please see these two links for "FAQs".  The Comcast link has Level 3's answer and Comcast's rebuttal.
    http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsLang=en&newsId=20101203005375&div=852537490
    http://blog.comcast.com/2010/12/20-qs—with-accurate-as—about-level-3s-peering-dispute.html
    As mentioned above, the video at this post, provides a good explanation of the differences between peering and transit.
    http://www.digitalsociety.org/2010/12/video-level-3-versus-comcast-peering-dispute/
    I can't see this diminishing the accuracy of the video, but it should be noted that Digital Society is partially funded by Arts & Labs, which has an array of partners listed on their web site; Viacom, NBC-Universal, AT&T, BMI, Verizon, Auditude, Microsoft, ASCAP, Cisco, Jib Jab (remember the Bush vs. Kerry video parody), Blue Pixel and Songwriters Guild of America. 

  10. Here are another two differing opinions on what this means.  One from Day Rayburn, formerly of Streaming Media and now with Frost & Sullivan.  He calls it a last mile and not a peering issue:

    http://blog.connectedplanetonline.com/unfiltered/2010/12/07/rayburn-on-comcastlevel-3-last-mile-not-peering-the-issue/

    And AT&T weighs in by bringing up a similar fight that Level 3 had with Cogent; except in that fight they were the ones demanding pay for a traffic imbalance.  A friend, who doesn't have a dog in this hunt but has negotiated these peering and transit deals, had mentioned the Level 3 – Cogent controversy to me last week.

    http://attpublicpolicy.com/government-policy/newsflash-it%E2%80%99s-not-really-louder-just-because-it-goes-to-eleven/?sms_ss=twitter&at_xt=4cffaaa550bbb16c,0

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