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This could potentially complicate Comcast’s attempt to obtain FCC regulatory approval before the end of the 2010. Level 3 Communications, which delivers Netflix online movies among other products and services, issued this statement today from chief legal officer Thomas Storz:
BROOMFIELD, Colo., November 29, 2010 — “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.
“It is our hope that Comcast’s senior management, for whom we have great respect, will closely consider their position on this issue and adopt an approach that will better serve Comcast and Comcast’s customers.
“While Comcast’s position is regrettable, Level 3 remains open and willing to work through these issues with Comcast. However, Level 3 does not seek any ‘special deals’ or arrangements not generally available to other Internet backbone companies.
“Given Comcast’s currently stated position, we are approaching regulators and policy makers and asking them to take quick 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.“
Editor-in-Chief Nikki Finke - tip her here.
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Maybe Washington has had its antenna up its decoder box about Net Neutrality but those of us in the business have long awaited news like this to force other companies and independents to take it or leave it. Level 3/Netflix’ call is solid and it should be/have been joined by all content providers. First Comcast parcels out download speed, then they demand to own your content if you want full access, then they block websites that they or someone else objects to, and thus the Internet is privatized. Activists like the Center for Digital Democracy warned about this a decade ago.
What keeps any content providing aggregator (Netflix, Google, etc.) or backhaul operator (Level 3, etc.) from doing what Comcast (or its progenitors) have done…
…invest in infrastructure (WiMax, cable, fiber, whatever) for the last mile?
Just because Party A doesn’t like what Party B wants to charge for a service doesn’t mean it is a good idea to get Momma Mafia (DC) involved.
Because Momma Mafia has shown herself to be so able and lacking in self-interest, right?
Tell you what – I’m proposing “Spouse Neutrality” – wherein you are compelled by the government to give me sexual access to your spouse…
Comcast is running with the media ball, now after taking over N B C (a clear violation of preexisting rules) they are now trying to control the internet. If they are allowed to do this, their competitors will follow and we the American people will have another “right” taken from us,
Boy o’ Boy if this isn’t a prime example for complete net neutrality, I don’t know what is!!! This is straight up Mafia shit!!
The electric power board in many cities will provide internet shortly. Goodbye cable monopoly. I can get my netflix through them cheaper and faster.
Sorry, but broadband over powerline has been found lacking…power lines don’t handle RF well.
Wi Max is better, but you end up fighting the same entrenched interests….Cable TV wants the internet to also be….cable TV.
This is huge. Hopefully fear of the FCC rejecting the Comcast/NBCU deal will put an end to it. But even if Comcast isn’t worried about the FCC, I suspect that Comcast is taking a huge risk.
The fact of the matter is that Comcast’s threat to cut off Level3 works both ways. If it’s okay for Comcast to cut a Tier 1 Internet backbone network provider off from Comcast customers, then it goes to argue that it would be okay for those Tier 1 backbone providers to cut off Comcast customers from the rest of the Internet in retaliation. Trust me when I tell you that it would be very easy for the Tier 1 backbone providers to blackhole traffic to/from Comcast. And it would only take a few of them to cut Comcast customers off from large portions of the Internet.
My guess is that Level3 was caught off-guard by Comcast’s demand and decided it was better to pay Comcast while they figured out what to do. Level3 got a lot of bad press several years ago when they unilaterally stopped peering with another Tier 1 ISP over a business dispute. So they probably want to make sure they have the PR ‘high ground’ before they tell Comcast that they ‘refuse to be held hostage’ and then start blackholing Comcast traffic if Comcast cuts them off. But other major Internet backbone providers likely won’t be as gun-shy; they will refuse to pay and will quickly retaliate if Comcast stops blocking traffic from their networks. If that happens Comcast broadband customers could very quickly find themselves cut off from large parts of the Internet, and when that happens you can be sure that those customers will start loudly screaming at Comcast – especially if they think it’s Comcast’s fault.
Level 3 customers are going to be pissed if suddenly they can’t deliver their content to Comcast customers, so it’s not so cut and dry. Comcast does have Level3 by the balls here, which is why Level3 felt the need to make a statement to the FCC. Knowing that the FCC is taking issue with the Comcast/NBCU merger, they knew it would hit the jugular.
DJL is right on the money. There is no way that Comcast will come out the winner in this dispute. Just wait until popular companies are blocked from Comcast consumers. The consumers are going to be stark raving mad, and they will drop Comcast for some other internet service. Heck, I might try con-ed’s new electric service if I have Comcast as my other choice. It might not be that good right now, but the electric company might be handling 70% of all internet traffic by 2016.
Here is a thing to think about. Sure that people might be dropping cable service, but it seems to me that Comcast is pretty much the only company experiencing any major problems. Me thinks there could be a great chance of Comcast going belly-up if the NBC deal isn’t approved.
Whether it’s peer to peer downloads or Netflix streaming, the old models of delivering content are flailing in their own crippled sh*t. The end, or at least a new beginning, is nigh.
I hope the FCC looks into this entirely. This would set a horrible precedent and is exactly what some folks have been warning against for quite some time.
And here is a preview for the FCC (i.e. the American public) of what to expect if Comcast is allowed to own and operate NBC/Universal.
A worse example of monopoly power in modern times is hard to conjure. Is there such a thing as a happy Comcast customer? Yet they dominate with market share due to lack of choice and follow it up with one of the most abysmal customer service histories in American business.
I know all the sharks are lining up to take their own wet bites out of Netflix but if this domino is allowed to fall the internet is in serious threat.
“clear abuse of the dominant control that Comcast exerts in broadband access markets as the nation’s largest cable provider.” Now level 3 knows how it feels to be a Comcast customer. Comcast has been gouging their residential customers for years. Theres is something wrong when your Comcast cable tv/internet bill exceeds your gas and electric bill.
My cable tv/internet bill is higher than my gas/electric bill and I don’t have Comcast. I really do not understand why you believe that providing entertainment content should cost less than providing electricity or gas. To most people, entertainment is not a necessity.
Consumers aren’t paying for content (except on non-commercial networks). They are paying for access to content. The content is owned by the commercial broadcast networks, local stations, and most cable networks who sell adverting to pay for the production of shows and/or their licensing fees. Consumers pay only for the delivery of the programs to receivers. When a single company (oh, like, say, I dunno, Comcast) owns the means of production, distribution, some of the shows themselves, and also the means by which its competitors deliver their wares to the consumer, it used to be considered vertical integration.
I am not saying they dont have right to charge for that service but that they are gouging and overcharging where people dont have options. Gas and electric is also not a necessity but it is far more valuable to me than entertainment content. Yet in this modern world I consider both necessities. I have the basic cable tv/internet packages with no extra features such as dvr, no premium content and no PPV charges yet my bill still substantially exceeds my G&E. And yes I do resent that, greatly. Why would that be something that is difficult for you to understand?
Have you not heard of those tiny outfits – DirectTV and Dish?
How long till Fox is tier 1 and Huff Post is tier 3 ? WikiLeaks…good bye.
They’d love to charge web site owners tiers for speed of service as well. The monetization of the internet is well planned…they just have to figure out a way to execute it.
Add criminal law enforcement powers by a bought and paid for congress, and the web is as censored as network TV.
Actually, Level 3 is violating their existing peering agreement with Comcast if they don’t keep the bandwidth they’re using from Comcast at about the same level as their sending. Right now, as long as it’s about even, they don’t charge each other. Because of Level 3′s Netflix deal, they are using more than their existing agreement allows, so…the fees, and now a new deal has to be worked out.
Of course, since Level 3 has throw “net neutrality” into what is out there to confuse the masses, it’s a big media mess.
Ethan,
I think you’re pulling from the same article I read: : http://www.digitalsociety.org/2010/11/level-3-outbid-akamai-on-netflix-by-reselling-stolen-bandwidth/
This guy came off as a Comcast shill to me. First off, Comcast has never come close to sending the same amount of traffic to Level3 as they send to Comcast. The fact is that Comcast the internet company benefits by the fact that their customers have access to the Netflix service, but Comcast the cable company is hurt by this. It has less to do with bandwidth and more to do with monopoly control over content.
Keep in mind that Akamai was previously serving the same traffic to Comcast subscribers with no issues. My guess is that Comcast saw the changing of the guard and decided to make a move when they had an opportunity.
Comcast shouldn’t get to set the rates in a case like this, but I also think it’s unfair that Netflix gets to use 20% of all U.S. Internet bandwidth in the evening for free.
Maybe you could make a case that the heavy Netflix users should pay for the heavy use of bandwidth, not Netflix, but someone has to pay for the extra bandwidth being used.
Sorry guys, but Ethan is dead right and Comcast is in the right on this one. The balanced traffic exchanges between Tier 1 ISPs has been a fundamental part of the Internet biz for well over a decade. Comcast isn’t discriminating against Netflix. It doesn’t care where the bits are coming from. When the bits are out of balance, they have a legit complaint, and charging for the imbalance is par for the course. Of course as Netflix grows, the imbalance will grow. Perhaps Netflix won’t be able to free-ride on other people’s infrastructure. Too bad for the whiney Deadbeat Nation crowd. Go whine to Obama. He may just be socialist enough to nationalize privately funded businesses like the cable guys. Seems to work for Chavez.
agree with Tim and Ethan too. seems pretty simple. Comcast invested their shareholders funds to build out a broadband infrastructure. why isnt it obvious that it is unfair for other companies to profit from Comcast’s investment? Similarly, Im a DirecTV customer who uses DirecTV’s on demand products (streaming movies in 1080p) over my TimeWarner cable highspeed account. If I didnt have the on demand product from DirecTV, I might switch to TWC for video too…why is this fair to TWC to have DirecTV use TWC’s broadband infrastructure to deliver DirecTV’s content? This all seems pretty simple.
Tim,
1- Level3 is not an ISP, it is a Tier 2 CDN service
2- Traffic exchanges between Comcast and Level3 (or any other CDN) have never been balanced because Comcast doesn’t really send upstream traffic to Level3. CDNs are purely about serving massive amounts of bits to the end user. This argument is nonsense.
3- Why didn’t Akamai ever run into this issue with Comcast when they were serving the same Netflix traffic? Did Comcast see an opportunity to strike during the changing of the guard?
4- The only reason the “bits are out of balance” is because Comcast subscribers are requesting video from Netflix. Comcast is positioning themselves as though somehow Level3/Netflix is forcing the video down their throat.
5- Netflix is paying plenty of money for infrastructure to serve their video through Level3′s backbone. They only serve as many bits through Comcast as Comcast’s customers are demanding.
A little background might help:
* The US has some of the worst internet connectivity in the free world. ISPs for years have taken subsidies and tax breaks that were meant to help them pay to build out infrastructure and they have walked away with the cash.
* With this in mind, Comcast is among many other ISPs who have failed to build out a substantial network. Many many customers have complained about Comcast throttling their connections – this is because Comcast can’t support the service they promise to their customers.
* Comcast owns their own video distribution platform (i.e. Fancast) and is attempting to purchase NBCU which comes with a large share of Hulu. It would be in their interest to penalize Netflix and make their business more difficult and expensive to run, while favoring their own services.
Again, Netflix is paying Level3 to serve the video, and Comcast’s own customers are demanding it. The only group having a problem here is Comcast, and they have a clear conflict of interest.
Correction, Level3 is a Tier 1 CDN
Agreed. Mostly people don’t understand how all this traffic is moved and monetized. Comcast is not blocking or slowing down Netflix via Level 3, but want to be compensated for the strain now imposed on their network by huge video traffic (Akamai is paying tolls). Your montly Comcast internet bill is to cover the massive investment to get the speed and through put of your internet connection (billions). Bandwith is not unlimited and very expensive to increase for last mile providers.
The only issue is if Comcast is not pricing equal to other relationships of similar size and not negotiating in good faith to be punitive. Level 3 screwed up and under bid the Netflix deal, and Netflix screwed up by going with a Level 3 thinking they are the same as Akamai but cheaper. This is not a net neutrality issue. I would prefer to see this worked out in the market, Comcast just needs to be careful not to look like Ma Bell redux and that there are alternatives like Verizon, AT&T in their markets.
While it’s true that (roughly) balanced traffic peering between Tier 1 ISPs has been a fundamental part of the Tier 1 internet biz, AFAIK Comcast is NOT a tier 1 backbone provider. Now it maybe that Comcast and Level3 have a peering agreement that requires balanced traffic. But there are plenty of peering agreements that don’t require balance, where it’s clearly understood that the flow of data won’t be equal. For example, Akamai peers with a number of Tier 2 and Tier 3 ISPs at various carrier hotels in North America (and perhaps around the world). This saves both Akamai and the local ISPs money even though it’s understood that a lot more data will be transferred from Akamai to the ISPs than in the other direction (the alternative for both the local ISP and Akamai would be to buy additional internet bandwidth from their Tier 1 supplier at a significantly higher cost). In other words, the business arrangement is mutually beneficial even though the amount of data transferred isn’t balanced.
So the real question is, what kind of peering agreement does Comcast have with Level3 and which party is really trying to change the terms of the deal?
I don’t know enough about the internet to know if Comcast is in the right or wrong on this one, but they keep bullying people (Direct TV, Dish Network, writers, etc..) and it needs to stop. You would think that they would look at what happened to Clear Channel when they decided to bully everyone and take everything over; failure. The Senate and FCC need to block this merger with NBC/Universal and take away their rights to control content unless Comcast is willing to completely give up their cable/internet side of the business. It’s a conflict of interest and is creating a mess.