There Ain't No Good Guys. There Ain't No Bad Guys. There's Only Comcast And Level 3 And They Just Disagree

Let's set the stage with some music:


On the surface, it looks like a David and Goliath story: Level 3 Communications (with a $1.64 billion market capitalization) versus Comcast (with a whopping $41.85 billion market capitalization). It is, as Level 3 Communications tells it, a story of a large-cap corporation threatening the livelihood of a company that only qualifies as mid-cap on a good day. In the words of Thomas Stortz, Chief Legal Officer of Level 3:

“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.“

Can't you already feel your heartstrings being tugged by this press release? Brave Level 3, a (comparatively) tiny company - almost a mom-and-pop home business, really - is being menaced by the faceless corporate juggernaut that is Comcast. Should Level 3 fall, nothing will stand between Comcast and an absolute iron-fisted mastery of all data in the internet!

Or maybe, just maybe, there is more than one side to the story. Maybe, just maybe, Comcast also has something to say about this. Maybe someone like Joe Waz, Comcast SVP, External Affairs and Public Policy Counsel, might have a different take.

Level 3 has inaccurately portrayed the commercial negotiations between it and Comcast. These discussions have 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 gain an unfair business advantage over 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.

To quantify this, 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 onto Comcast and Comcast's customers, instead of Level 3 and its customers.

Level 3's position is simply 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 Level 3'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."

So. Maybe, just maybe, Level 3 isn't being entirely forthcoming. Maybe, just maybe - this is crazy, but hear me out - maybe Level 3 has embellished the truth a little. The little guy in the fight isn't always the honest one, after all.

Who do I believe? Frankly, I tend to assume that all corporations will lie to, cheat, steal, and kill anyone and anything in their paths in the pursuit of the all-mighty dollar (or yen, or euro, or ruble, or yuan, or whatever else profit can be expressed in). So, I assume that both Comcast and Level 3 are lying about (excuse me, I mean spinning) what happened.

I don't think Level 3 cares in the slightest about "net neutrality". They just want to charge as much as possible when competitors have to route data through their backbone networks, while paying as little as possible when they have to route data through their competitors backbone networks.

I don't think Comcast is attempting to extort anything out of Level 3. They just want to charge as much as possible when competitors have to route data through their backbone networks, while paying as little as possible when they have to route data through their competitors backbone networks.

Business as usual. That's all this is.