Netflix Partner Level 3 Says Comcast Fees “Threatens the Open Internet”

When “net neutrality” is a matter of defending highfalutin open Internet principles and P2P sites, it’s hard to get average people too excited about it: But threaten their cheap Netflix, and matters get serious. The New York Times reports that Netflix partner Level 3 Communications, which delivers Netflix’s streaming video to customers’ computers, will have to pay recurring additional fees to ISP Comcast for continued carriage of their content. Level 3 is not too happy about this, and says it constitutes an assault on the open Internet and net neutrality.

“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.

…

“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.

While the dog whistle that is net neutrality has brought many defenders to Level 3’s side, and Comcast, which won The Consumerist’s “worst company in America” award this year, has a bit of a public image problem, this is a trickier issue than Level 3=Good, Comcast=Bad; Comcast’s sudden, unilateral demand for money does sound slimy, but when a company [Netflix] grabs more than 20 percent of peak US Internet traffic, is it legit to argue that they should assume some of the costs?  Karl Denninger argues that it is:

This is the base problem with all overcommitted services where the business model is predicated on fractional use of maximum possible resource consumption. When that model is violated costs go up dramatically. This is ok provided the person who has the cost also gets the revenue that is occasioned by the violation of the original model.

But in the case at hand, Netflix and similar get the revenue, but Comcast gets the cost.

I saw this one coming a mile away. If L3 manages to get the FCC involved and Comcast is prohibited from doing this they will be forced instead to either cap-and-charge customers or dramatically raise their prices, which will also blow back on the content folks like Netflix.

Suddenly that $8 “video any time” subscription becomes not $8, but $28 as Comcast adds another $20 to your monthly cable internet bill.

When Level 3 charges Comcast with violating net neutrality, they are accusing them of discriminating against a type of traffic — streaming video — which becomes even more problematic if the Comcast-NBC Universal merger goes through and Comcast deliberately speeds up NBC content and slows down rival content. But Comcast says that the dispute is being misrepresented, and it’s really a matter of peering — a Comcast exec tells the NYT “[Comcast] has had a peering agreement with Level 3 to swap traffic fairly evenly. Now Level 3 is sharply increasing its traffic, he said, while resisting a commercial agreement to pay for that.” The discussion about net neutrality is one that won’t end anytime soon, and the questions that determine its outcome will continue to get murkier, yet more important in determining the future of the Internet.

(NYT via Slashdot)