Comcast vs. Level 3 Forces Net Neutrality Issue

Yesterday, Level 3 went public with its complaints that Comcast is demanding new fees in order to deliver Level 3’s data over its cable broadband networks. The dispute becomes a lot more interesting when you consider that Level 3 is now distributing the content for Netflix’s on-demand streaming video service. The stakes are increased by the fact that Comcast — the largest cable service in the country — is already under federal scrutiny as it moves to complete its purchase of NBC Universal.

As I dig into the story, however, I find that it’s hard to tell who is truly the aggrieved party here. From what I understand, Level 3 is one of several services that distribute Internet content along the backbones of the data network. Local service providers — such as Comcast — make arrangements with these services so that they can get their data to the end customers. In many cases, it apparently has been standard practice for the nationwide and local services to simply make reciprocal arrangements to give access to the each other’s networks.

Comcast claims, however, that the usage is now lopsided. Level 3 is using much more of Comcast’s resources than the other way around, and Comcast feels that it should be compensated for this. What is causing all that usage? A recent study showed that Netflix accounts for as much as 20% of the total traffic on the Internet at peak times. So maybe Comcast has a valid claim.

On the other hand, Level 3 complains that Comcast is essentially holding its users hostage and demanding that Level 3 pay an unreasonable fee for access. The fear is that this could lead to other services picking and choosing which content they will pass through to their customers. Could Comcast make a sweetheart deal with NBC Universal that would allow their content access to the Comcast networks at a lower fee than for competing content providers?

I certainly don’t have the answers on this, but it appears to me that the growth of the Internet has outrun it rules and we are at risk of falling into a black hole of confusion. It seems to me that we need to have rules established so content providers get access to consumers on a reliable basis and at reasonable cost, while the cable companies and other broadband providers are able to make enough revenues to support their businesses. I expect that the FCC can no longer ignore this “net neutrality” mess, but I also suspect that it’s too late for the FCC to fix it. I expect that there will be court cases and new federal legislation before this problem gets fixed.