December 3, 2010 11:01 AM PST

Level 3: Comcast is strong-arming us

In case you didn't hear it loud and clear the first time, Level 3 is once again accusing Comcast of setting up a toll booth on the Internet in violation of Net neutrality principles.

Earlier this week, Level 3 set off a public relations war with cable and broadband giant Comcast as it described an ongoing commercial dispute between the two companies. To sum it up, Comcast is asking Level 3 to pay a fee for sending additional traffic over the Comcast broadband network. The additional traffic, which will more than double the amount of traffic that Level 3 sends to Comcast, will come as a result of a deal that Level 3 has struck with online video heavyweight Netflix.

Netflix is the largest streaming video service in North America and at peak times accounts for about one-fifth of all U.S. traffic on the Internet. Last month, Level 3 won a deal to become the video company's content delivery network provider, which means it will store and send Netflix streams to consumers who request on-demand video. The content delivery network is established at points in the network that puts the video content closer to consumers.

Neither company disputes that Level 3's deal with Netflix will greatly increase the amount of traffic that Level 3 sends onto Comcast and other broadband providers' networks. What they disagree about is whether Level 3 should have to pay for sending that additional traffic over Comcast's network.

Comcast claims Level 3 should pay a fee, since it will increase the ratio of traffic it sends to Comcast from 2:1 to 5:1. Comcast says this violates its current peering agreement with Level 3, which allows the companies to swap traffic at no charge so long as the companies are sending roughly equal amounts of traffic to and from each other's networks. What's more, Comcast has said that it currently charges Akamai, the company that previously delivered Netflix content, a fee for doing the same thing.

But Level 3 argues in an FAQ issued today that it's being strong-armed by Comcast. It claims the arrangement with Comcast is not a peering arrangement and it is instead an interconnection agreement.

"Comcast's mischaracterization of this disagreement as a 'peering dispute' is incorrect." Level 3 said in its FAQ. "In reality, this is a fundamental interconnection dispute between Level 3 and Comcast."

Level 3 went on to explain the situation this way:

"Comcast wants to use its local access network dominance as leverage to force Level 3 to pay for traffic requested by Comcast customers that already pay Comcast for access to that same content. Having sold broadband access services to its customers, Comcast wants to sell the same service again to Level 3 and other networks connected to Comcast. If the dispute were simply 'commercial,' the dispute would have already been settled or would never have arisen in the first place. Comcast's status as the nation's largest provider of consumer broadband service enables Comcast to force Level 3 to pay the 'toll' Comcast has demanded."

Comcast said earlier in the week in a letter to the FCC that:

"Level 3 is trying to game the process of peering--one that has worked well and consensually, without government interference, for over a decade--in order to gain a unique and unfair advantage for its own expanding CDN service. Level 3's problem apparently arises out of the fact that it recently won a bid to become one of Netflix's primary CDN providers--in competition with the major national CDNs that already send Netflix and other traffic to Comcast's network. In order to undercut its CDN competitors, Level 3 wants to avoid the commercial arrangements other CDN companies use to terminate traffic onto Comcast's and other providers' networks, and instead force Comcast to accept its CDN traffic for free, under a 'peering' relationship. This is not how peering works, here or anywhere in the world. What Level 3 is suddenly pushing--a "new theory" of peering--would throw the traditional, "balanced traffic" peering rulebook out the window, give Level 3 an unfair cost advantage over its competitors, and shift all of the costs from Level 3 and its content customers onto Comcast and its high-speed Internet customers."

Comcast also issued this response to Level 3's latest claims:

"Level 3 has said nothing new. The fact remains this is a business dispute regarding traffic ratios, commonly referred to as peering, between Comcast and Level 3 which we are committed to resolve fairly and consistently with established industry principles. Industry experts and analysts overwhelmingly agree, as their commentary has shown all week long. The most important thing to know about this dispute is that Comcast will do absolutely nothing to impact our high-speed Internet customers, who can and will be able to access any Internet content they want, including streaming video from all sources."

So far Level 3 has not filed a complaint or any other documents with the Federal Communications Commission over its Net neutrality charges. It simply has said that it's letting policy makers and Congressional leaders know of its concerns. This is curious given that the FCC is the agency that should and could look into these concerns. In fact, it is currently drafting official regulations right now on this very issue.

Even though Level 3 has not officially reached out to the FCC, Chairman Julius Genachowski said this week that the agency is looking into the matter. The agency was contacted for a comment on this story but did not respond before it was published.

Marguerite Reardon

Full Profile E-mail Marguerite Reardon

Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies.