Level 3 takes spat with Comcast public

Internet backbone provider Level 3 is accusing cable giant Comcast of violating Net neutrality principles as it takes public a dispute over network peering between the two companies.

On Monday, Level 3 issued a statement that said Comcast plans to charge it a "recurring fee" to carry video traffic on the Comcast broadband network. Level 3 said that charging such a fee violates the Federal Communications Commission's Net neutrality principles.

"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," Thomas Stortz, chief legal officer of Level 3, said in a statement. "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."

But Comcast says that Level 3 is being disingenuous in its portrayal of what is a typical network peering negotiation between two network providers.

"Level 3 has misportrayed the commercial negotiations between it and Comcast," Joe Waz, Comcast's senior vice president for external affairs, said in a statement. "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."

The news comes on the heels of Netflix turning to Level 3 to handle its streaming video. Earlier this month, Netflix announced the deal that would send the bulk of its content-distribution business to Level 3 and Limelight and less to rival Akamai. This was a huge win for Level 3 in terms of its content delivery network business, but it also means that the company will now be carrying a much higher traffic load on its network. Subsequently, it means that it will also ask its peering partners to accept much higher traffic loads than previously.

Prior to the Netflix deal Comcast and Level 3 had a typical industry peering arrangement. Level 3 is an Internet backbone provider and it regularly carries traffic that originates and terminates on Comcast's broadband network. Under their previous arrangement, the companies essentially swapped traffic since both networks generated equal amounts of traffic.

But with the Netflix deal, the balance of traffic between the two companies will shift dramatically. Netflix has been said to generate 17 percent of traffic on the Internet at peak times in the U.S. Comcast said in its statement that it expects to receive five times more traffic from Level 3 as part of this new arrangement.

Unlike the peering relationship between Level 3 and Comcast, Comcast and Akamai, which had previously delivered Netflix's streaming video, had a commercial arrangement, a source close to Comcast confirmed. In other words, instead of swapping traffic between Comcast and Akamai for free, Comcast charged Akamai a fee to deliver its traffic including the Netflix video content.

Comcast said in its statement that all it has been trying to do in its negotiations with Level 3 is to work out a similar deal as the one it had originally had with Level 3's content delivery competitors.

"Comcast offered Level 3 the same terms it offers to Level 3's CDN competitors for the same traffic," Waz said. "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."

It has accused Level 3 of trying to get a free ride by crying foul over Net neutrality.

"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," Waz said in the Comcast statement. "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. "

But Level 3 claims it was bullied into accepting a deal that it says violates the "spirit and letter "of the FCC's proposed Internet Policy principles and other regulations and statutes, as well as statements Comcast has made previously about favoring an open Internet, Stortz said.

Level 3 executives are asking Comcast to reconsider its position and are approaching regulators and policymakers, asking them to take 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," the company said.

Representatives from Level 3 did not return calls asking for further comment based on Comcast's assertions.

Public interest organizations were quick to take Level 3's side in its fight against Comcast.

"Comcast's request of payment in exchange for content transmission is yet another example of why citizens need strong, effective network neutrality rules that include a ban on such 'paid prioritization' practices," said Andrew Jay Schwartzman, senior vice president and policy director of the non-profit law firm Media Access Project. "It is also yet another clear demonstration of why Comcast should not be permitted to acquire NBC Universal, given its clear tendency to exercise control in the video marketplace."

"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," said Harold Feld, legal director of Public Knowledge. "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."

But other experts say that Level 3 may be exploiting the tension over Net neutrality to negotiate more favorable business terms for itself.

"If this turns out to be a fight over peering arrangements, then this clearly has nothing to do with Net neutrality," said Larry Downes, a consultant and author, who has contributed columns regarding Net neutrality and other Internet issues on CNET.

Level 3's complaint comes at a time when the Net neutrality issue is bubbling to a head at the Federal Communications Commission. The FCC, which has been promising to make Net neutrality rules official regulation for more than a year, is expected to lay out its final plan for those rules next month at its December open meeting.

The FCC is also considering the merger between Comcast and NBC Universal. And some industry watchers have speculated that the FCC may include Net neutrality provisions as conditions in the merger.

Last September, FCC Chairman Julius Genachowski proposed making four of the Net neutrality principles official regulation. He also proposed adding two new principles.

It is these original four principles that Level 3 accuses Comcast of violating. The existing principles can be summarized this way: Network operators cannot prevent users from accessing lawful Internet content, applications, and services of their choice, nor can they prohibit users from attaching non-harmful devices to the network.

The additional principles, which the FCC hopes to make part of the regulation, would prevent Internet access providers from discriminating against particular Internet content or applications, while allowing for reasonable network management. The second principle would ensure that Internet access providers are transparent about the network management practices they implement.

It's unclear what type of action Level 3 expects the FCC to take, since the FCC's authority to enforce these principles has already been called into question by a federal court.

In 2008 the FCC gave Comcast a slap on the wrist for violating its principles when the company throttled Bit Torrent traffic on its network. Earlier this year, a U.S. appeals court threw out the FCC ruling. Judges in the case said that the FCC had no authority to regulate an Internet provider's network management practices.

(CNET's Greg Sandoval contributed to this report.)

Updated 6:42 p.m. PST with background and reaction.