Level 3: This Is Not a Peering Dispute
Level 3 Communications Inc. (NYSE: LVLT) lobbed another missile at Comcast Corp. (Nasdaq: CMCSA, CMCSK) today, claiming, in the form of a lengthy Q&A-style statement, that the MSO's characterization that this dispute is about peering "could not be more misleading." (See Did Level 3 Know What It Was Getting Into? and Level 3: Comcast Erected Web Video 'Toll Booth' .)
In Level 3's view, the debate is centered on "interconnection" between communications networks rather than a peering between two Internet backbone networks. (See Level 3 Wants to 'Clarify' Comcast Dispute.)
"Unlike 'peering' in the Internet backbone, where competition abounds and prices have been declining steadily, Internet carriers that have content requested by Comcast subscribers have no choice but to exchange traffic with Comcast," Level 3 said. "Comcast is using this dominant position to demand payment for traffic delivered at its customers’ requests. You simply cannot 'route around' Comcast to provide requested content to Comcast’s subscribers."
Interconnection, the company adds, "is a general term that applies when two communications networks exchange traffic, regardless of the commercial terms that are agreed." To back up its original "toll booth" argument, Level 3 said Comcast "wants to change the rules of the game" by using its local access network as "leverage to force Level 3 to pay for traffic requested by Comcast customers that already pay Comcast for access to that same content." Level 3 also claimed that no other broadband US ISP is charging the type of fees the MSO is now demanding.
Level 3 did acknowledge that that it will be dumping more traffic onto Comcast's networks, but fears that the recasting of the debate all but guarantees that traffic will remain "out of balance" because a customer who requests to watch a Web video typically sends a small upstream request to receive a much larger amount of downstream traffic.
"Comcast stands to make many millions of dollars from Internet backbone carriers that bring requested content to Comcast for delivery to Comcast’s subscribers," Level 3 said, claiming that the dispute doesn't have anything to do with its new Netflix Inc. (Nasdaq: NFLX) deal, but is about the "precedent" that Comcast sets with respect to the handling of over-the-top video services.
Likewise, Level 3's also sticking to its guns that this debate is indeed a network neutrality issue, holding that Comcast's ability to set pricing and "unpredictable" tolls will "become a tool to reduce competitive content available on the Internet."
Comcast, meanwhile, continues to portray this as "a good old-fashioned commercial peering dispute" that is not about online video, paid prioritization or the installation of Internet toll booths," according to a letter dated November 30 to Federal Communications Commission (FCC) Wireline Competition Bureau chief Sharon Gillett from Comcast SVP of external affairs & public policy counsel Joe Waz.
"In order to undercut its CDN competitors, Level 3 wants to avoid the commercial arrangements other CDN companies use to terminate traffic onto Comcast's and other providers' networks, and instead force Comcast to accept its CDN traffic for free, under a 'peering' relationship," Waz wrote.
The letter claims that Level 3 approached Comcast shortly after Level 3 reached a "low ball" Netflix deal about securing 27 to 30 new interconnection ports to support the delivery of more traffic to Comcast's network "for free." Waz said Comcast scrambled to provide it with six ports at no charge, and told Level 3 it would provide additional ports on a "commercial wholesale basis" as it does with other CDN providers.
Comcast also posted a video on November 30 featuring Comcast EVP of national engineering and technology operations John Schanz explaining "how Internet peering works":
Update: Comcast responded with a statement of its own Friday, claiming that Level 3's latest statement treads already-traveled ground and that its network-neutrality-related allegations are false:
Level 3 has said nothing new. The fact remains this is a business dispute regarding traffic ratios, commonly referred to as peering, between Comcast and Level 3 which we are committed to resolve fairly and consistently with established industry principles. Industry experts and analysts overwhelmingly agree, as their commentary has shown all week long.
The most important thing to know about this dispute is that Comcast will do absolutely nothing to impact our high-speed Internet customers, who can and will be able to access any Internet content they want, including streaming video from all sources.
— Jeff Baumgartner, Site Editor, Light Reading Cable