Netflix's Content Delivery Network (Level 3) Cries Foul Over Comcast "Toll Booth"; Comcast Cries Back

Categories: New TV Technology

Written By

November 29th, 2010

Dueling press releases, disguising another business negotiation dispute?

Regardless, not great timing for Comcast as they try to get final approval for their NBCU acquisition.

From Level 3:

Level 3 Communications Issues Statement Concerning Comcast's Actions

BROOMFIELD, Colo., November 29, 2010

Level 3 Communications, Inc. (NASDAQ: LVLT) today issued the following statement, which can be attributed to 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.

“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.“
About Level 3 Communications
Level 3 Communications, Inc. (NASDAQ: LVLT) is a leading international provider of fiber-based communications services. Enterprise, content, wholesale and government customers rely on Level 3 to deliver services with an industry-leading combination of scalability and value over an end-to-end fiber network. Level 3 offers a portfolio of metro and long-haul services, including transport, data, Internet, content delivery and voice. For more information, visit www.level3.com.

© Level 3 Communications, LLC. All Rights Reserved. Level 3, Vyvx, “From Creation to Consumption,” Level 3 Communications and the Level 3 Communications Logo are either registered service marks or service marks of Level 3 Communications, LLC and/or one of its Affiliates in the United States and/or other countries. Level 3 services are provided by wholly owned subsidiaries of Level 3 Communications, Inc. Any other service names, product names, company names or logos included herein are the trademarks or service marks of their respective owners.

Forward-Looking Statement
Some of the statements made in this press release are forward looking in nature. These statements are based on management’s current expectations or beliefs. These forward looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside Level 3’s control, which could cause actual events to differ materially from those expressed or implied by the statements. The most important factors that could prevent Level 3 from achieving its stated goals include, but are not limited to, the current uncertainty in the global financial markets and the global economy; disruptions in the financial markets that could affect Level 3’s ability to obtain additional financing; as well as the company’s ability to: increase and maintain the volume of traffic on the network; successfully integrate acquisitions; develop effective business support systems; defend intellectual property and proprietary rights; manage system and network failures or disruptions; develop new services that meet customer demands and generate acceptable margins; adapt to rapid technological changes that lead to further competition; attract and retain qualified management and other personnel; and meet all of the terms and conditions of debt obligations. Additional information concerning these and other important factors can be found within Level 3’s filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.

From Comcast:

Comcast Response to Level 3 Charges

Comcast Statement on Level 3 attributable to Joe Waz, Senior Vice President for External Affairs and Public Policy Counsel, Comcast Corporation:

“Level 3 has misportrayed the commercial negotiations between it and Comcast. This has 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 undercut 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.

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 on Comcast and Comcast's customers, instead of Level 3 and its customers.

Level 3's position is 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 Level3’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.’”

 
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