In latest treatise, Level 3 says feud with Comcast like great telecom unbundling

Continuing its public feud with Comcast, Level 3 Communications Friday released its own FAQ to explain to both the public and public policy makers, why their fight is important.

The disagreement between cable operator Comcast and content delivery network (CDN) Level 3 turned into a minor public relations war earlier this week when Level 3 announced that Comcast was demanding higher fees because of Level 3's bandwidth-consuming streaming video traffic.

Level 3 has provided CDN services for Netflix, the National Football League, and several other big name content providers; but in early November, Netflix announced that Level 3 Communications would become its primary CDN starting in 2011.

This is significant because Netflix is rapidly becoming one of the biggest consumers of bandwidth out there. Canadian network hardware company Sandvine released a study in October which suggested that Netflix streaming video traffic constitutes more than 20% of the bandwidth consumed in the "primetime" hours of 8pm-10pm.

Described in the most basic terms, Netflix owns the content, Level 3 owns the network of servers sending that content out to be streamed, and Comcast owns the pipelines connecting the users to the content. The different networks are often so-called "peers," meaning they exchange traffic freely with one another because it ultimately benefits everyone.

Now that Level 3 will be handling the majority of Netflix streaming traffic, it will be sending a tremendously larger share of traffic to Comcast's pipelines. In turn, Comcast said it would have to begin charging Level 3...effectively switching their peering arrangement to a transit arrangement. Transit services are a bit more complicated, and involve prices per megabit per month, and minimum bandwidth commitments.

Level 3 Chief Legal Officer Thomas Stortz accused Comcast of "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."

Comcast's Senior Vice President of External Affairs and Public Policy Counsel Joe Waz fired back, "This is all about Level 3 gaining an unfair advantage over its competitors by gaining enormous additional capacity at no cost to itself, instead shifting the financial costs to Comcast's high speed data customers...The bottom line is that this is a good, old-fashioned commercial peering dispute."

In its FAQ statement today, Level 3 roundly disagrees. "The dispute between Level 3 and Comcast is not a peering dispute, which relates to connection of Internet backbone networks," the document says. "At issue is a fundamental interconnection disagreement between Comcast, as a provider of local high speed Internet access to consumers who pay Comcast for access to content, and Level 3, which delivers content to residential broadband access providers like Comcast in response to consumer requests. 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. 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."

Level 3 then goes on to make a handful of proclamations about Comcast and its intentions, including the following (taken directly from the text):

• Comcast wants to use its local access network dominance as leverage to force Level 3 to pay for traffic requested by Comcast customers that already pay Comcast for access to that same content.
• No other broadband access provider in the U.S. is now charging Level 3 the type of fees that Comcast is charging.
• Comcast is attempting to transform the dispute with Level 3 into a peering dispute because, if it is successful in re-casting the debate, one of the traditional criteria for peering -- balance of traffic sent versus traffic received -- could be used to turn even the largest Internet backbone providers into paying customers of Comcast.
• Comcast...has a strong motive to discourage competition with its cable TV service. Online distribution of movies, TV shows and other content threatens Comcast's traditional "closed" video distribution model. While Comcast disputes that the threat exists, press reports highlighting "cable cord cutting"...confirm it is real.
• Level 3 advised Comcast that [it] was willing to negotiate fair and equitable economic and technical terms to achieve a balanced interconnection arrangement, including offering to use the Level 3 fiber optic network to alleviate any potential congestion on Comcast's network. When Comcast said that it had limited amounts of equipment needed to provide the requested capacity, Level 3 offered to provide Comcast with this equipment.

Level 3 ultimately compares this disagreement to the Illinois State Regulatory Commission's disagreement with "Baby Bell" Ameritech which resulted in the interconnection principles in the Telecommunications Act of 1996. These principles outline the rules for connecting local exchanges and unbundling access to them.