Sunday, November 28, 2010

Level 3: Comcast Raises Toll Booth for Internet Video

Level 3 Communications is accusing Comcast of "raising a toll booth" for Internet movies. Last week, Comcast informed Level 3 that it will begin charging a recurring fee to Level 3 to transmit Internet online movies and other content to Comcast's customers who request such content. Level 3 said it has agreed to this unilateral demand under duress, only because it was a "take it or leave it" demand from Comcast.

Comcast did not immediately respond to Level 3's accusation, but the recent Netflix deal, under which Level 3 will act as its primary content delivery network, is likely to lead to a surge of new traffic from Level 3 to Comcast. According to media reports, this could be lead to a 5:1 traffic ratio and Level 3's own policy has been to negotiate a settlement fee when peering exchanges are out of balance.

In a press statement, Thomas Stortz, Chief Legal Officer of Level 3, said:

"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.

  • Earlier in November, Level 3 Communications confirmed that it was selected to serve as the primary content delivery network (CDN) provider for Netflix. Financial terms were not disclosed. As a result of the deal, Level 3 announced further investment in its CDN capacity. Level 3 will double its storage capacity and add 2.9 Terabits per second (Tbps) of globally available CDN capacity. This is in addition to the 1.65 Tbps that was deployed in the third quarter of 2010. In addition to supporting Netflix for streaming movies and TV shows, Level 3 will store the entire Netflix streaming library of more than 20,000 titles. Over the course of November and December, the two companies will move the library to storage with Level 3 in preparation for serving traffic beginning Jan. 1, 2011.

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