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Level 3 Cries Foul Over Comcast Streaming Fee

Level 3 Cries Foul Over Comcast Streaming Fee

Netflix distributor Level 3 is raising the volume in the Net neutrality debate, complaining that Comcast is charging an unfair "toll booth fee" for its delivery of content to consumers. At the foundation of the argument is a tug-of-war over whether the Internet should operate on market-based principles or be subject to government regulation.

By Rob Spiegel
11/30/10 12:20 PM PT

Level 3 Communications on Monday complained when Comcast demanded the content delivery network pay a recurring fee for transmitting online moves and games to Comcast customers. Level 3 said the move violates the principles of Net neutrality.

Comcast notified Level 3 on November 19 that it would begin charging for streaming and asked for a recurring fee to transmit online movies and other content. Level 3, which recently announced it provides streaming services for Netflix, said the action amounted to setting up an "Internet toll booth." The company said it would pay the fee "under protest" in order to avoid disrupting service to customers.

Appealing to Regulators

Level 3 will ask "regulators and policy makers" to take quick action to make sure the Internet does not become "a closed network controlled by a few institutions with dominant market power," said Chief Legal Officer Thomas Stortz.

The deal it offered Level 3 is the same it offers every CDN, countered Comcast. The cable giant accused Level 3 of being "duplicitous," saying the company is pressuring Comcast into accepting more than a twofold increase in the amount of traffic it delivers on the Comcast network.

Comcast also claims Level 3 is trying to gain a competitive advantage over other CDNs by asking to stream content for free.

Level 3 and Comcast did not provide the E-Commerce Times with comments before press time.

Net Neutrality Options

So far, the Federal Communications Commission is mum on the issue. Level 3 believes Comcast's position violates the spirit and letter of the FCC's proposed Internet Policy principles and other regulations and statutes.

The FCC is still mulling its options, however. Although the commission postponed an early December meeting to December 21, Chairman Julius Genachowski said it is on track for taking action on Net neutrality.

A Net neutrality advocacy group, the Progressive Change Campaign Committee, is circulating a petition asking the FCC to prevent Comcast from charging Level 3 in order to preserve Net neutrality. The 600,000-member group plans to deliver the petition to the FCC.

Can the FCC Intervene?

The FCC may not have the answer to the conflict between Level 3 and Comcast.

"The move by Comcast raises antidiscrimination questions and anticompetitive questions," Art Brodsky, the communications director at Public Knowledge, told the E-Commerce Times. "Companies like Level 3 and Comcast can't go to the FCC and ask for a ruling because it's not clear the FCC has authority over broadband.

The timing of Comcast's fee to Level 3 came a week after Level 3 announced it had signed a multiyear deal with Netflix.

"It's an interesting coincidence," said Brodsky. "I don't know if this situation will be taken up by the FCC. This transcends Net neutrality. It's not going to be resolved at the FCC meeting next month."

Market-Based or Government-Run?

There is a philosophical issue behind Level 3's conflict with Comcast. How involved should the government be?

"Comcast wants to charge for the amount of data sent -- not just the speed in which it is sent, which is already tiered," Rob Enderle, principal analyst at the Enderle Group, told the E-Commerce Times.

"The reason is that capacity has costs related to it, and they feel that the companies and people that are using more of a resource and forcing additional investment in it should pay for that investment," he explained. "This is Capitalism 101."

The other point of view is that the Internet should not have toll booths.

"Net neutrality proponents and users (companies and individuals) want the network to be an entitlement. You pay for access, but you can use all that is available," said Enderle. "This is Socialism 101, and to work it really needs to be a government resource, because the model is inherently unprofitable otherwise. Highways use a similar model to what the Net neutrality folks want for the Internet, and they provide equal access and are plagued with repair backlogs and traffic jams."


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