70 Comments

Summary:

The fight that erupted today between Level 3 and Comcast involves an esoteric agreement and equally esoteric policy arguments, but at its core this fight is about money. Yet what has begun as commercial dispute may change how the web works and who pays for it.

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The fight that erupted today between Level 3 and Comcast involves an esoteric agreement between two of the Internet’s big players colliding with a series of equally arcane policy arguments, but at its core this fight is about money. Yet what began as a commercial dispute may end up fundamentally changing how the web works and who pays for it.

So what’s the issue? Level 3 told the world that Comcast had hit it up for more money in order to deliver traffic from Level 3’s customers (such as Netflix) to Comcast’s 17 million broadband subscribers. Level 3 said Comcast’s demand for more dough violated the principles of the Open Internet, which is shorthand for net neutrality. On the other side, Comcast, said Level 3 was trying to sell itself as a CDN while not having to pay fees to Comcast as other CDNs do. In short Level 3, was calling itself a CDN to its customers and a backbone provider to Comcast. This (plus the fact that Level 3 owns one of the largest Internet backbone networks) enabled it to undercut its competitors in the CDN business because it didn’t have to pay the fees that Akamai or Limelight did to get content onto Comcast’s network.

For example, Level 3 even told people back in 2007 that it could deliver CDN services for the same price as Internet access, a feat made possible because it owned its own networks. So when Comcast pointed out the traffic Level 3 was sending to its network would more than double to reach a 5:1 ratio when compared to the Comcast traffic sent over Level 3′s network, it was justifying its decision to act, something covered in Comcast’s peering agreement . (For detailed analysis of Comcast’s peering agreement check out this post from Vijay Gill.)

Peering is the face of this issue — the idea that Internet Service Provider A allow traffic from similarly sized and loaded networks to traverse its own for free because ISP A‘s traffic gets a pass when it’s on networks owned by ISP B or ISP C. However, the soul of this issue is how it exposes how uncompetitive the nation’s broadband networks really are. The very threat that Level 3 alleges Comcast made — essentially that Level 3 could accept the proposed fee or Comcast wouldn’t deliver Level 3’s content — should lead to concern.

This is a problem the Congress and regulators cannot ignore. Just as in the recent retransmission fights in the pay TV world, these rumblings between giant companies leaves consumers in the lurch, even though they’ve actually paid for access to the Internet — that is, the whole Internet, not one approved by Comcast or some other company. The problem, of course, is lack of competition in the broadband markets.

For the consumers who aren’t confused by their inability to access certain content and decide to switch to a provider working with Level 3, there aren’t a lot of choices. Typically, areas have only two ISPs — a cable company and a telco — and many ISPs are now offering service with annual contracts which could lock a consumer in. Plus, what happens if AT&T or Verizon decide to address this imbalance of traffic with Level 3? It is, after all, fairly common for there to be an imbalance of traffic given that consumers tend to request data from Level 3 and backbone providers far more often than they upload content to Level 3’s end customers.

It’s not far-fetched, given that by getting Level 3 to pay more for delivering a CDN service that essentially is the same as its Internet access, but does send more Level 3-specific traffic onto Comcast’s network, Comcast is getting Level 3 to pay for the increase in traffic on its network. One can wonder if Akamai’s CDN fees are calculated on the traffic it sends to an ISP or how much space its servers take up in the ISP’s data center, but with Level 3 and Comcast, there’s no need to wonder. It’s about the traffic. This idea of content providers paying ISPs to deliver the traffic to consumers, while consumers pay ISPs for access to the pipe isn’t a new one.

If that flies, then companies such as Google or Hulu may find themselves paying more for peering. That’s great for the ISPs, but again, it’s not like there are myriad opportunities for a company like Google to exert its market power short of building its own networks. For example, if a large content provider wants its services to reach folks in Rochester, N.Y., it has to work with either Frontier or Time Warner Cable. So while Comcast and Level 3 fight their commercial disagreement over peering in the press and possibly in front of regulators, the real people to suffer will be those who depend on the web. Not because Comcast has decided to call Level 3 on it being a CDN, but because of the lack of real competition in our broadband networks.

Yup, we have a problem!

Related GigaOM Pro Content (sub req’d):

  1. Sorry, but what does CDN stand for? Doesn’t GigaOM have a Style Guide (SG) for acronyms? It’s Journalism 101: adopt a SG.

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    1. CDN = Content Delivery Network. I’m no expert but if I had to explain it, it’s a “data delivery” service you buy from Akamai, Limelight, … if you have a lot of data (e.g., pictures, videos) on your server/”warehouse” and want to make sure several 100m people all over the world can access it speedier and more reliably than if you were to host it yourself from a single location – or, if you’re FB, GOOG, …, you can of course set up your own CDN.

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    2. CDN is a Content Distribution Network or Content Delivery Network. It works under a “all your apples in a bunch of baskets” concept. Multiple servers with your content would be placed in various areas of a network, less hops means better use of your available bandwidth. Hope this helps, and yes I agree, a Style Guide is warranted.

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      1. Guys, my bad on not spelling out CDN on first reference. We do have a style guide but editors enforcing it are rare at 10 pm. Thank you to our commenters who helped people out on that.

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  2. Great post! Thanks for explaining this so clearly.

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  3. Thanks for the nice post. Hope it all works out for the good of everyone. mainstreethost

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  4. Wait, what’s wrong with charging for more traffic? If there is a balance of traffic in a peering agreement, then all are happy. But if there is a 5:1 ratio I agree that the ISP has a right to charge to deliver that extra traffic.

    The point of net neutrality is that all *types* of traffic be treated equally. There’s nothing wrong with charging for added traffic volume by source… unless of course those prices are not controlled by any real competition. (The real issue!)

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    1. @Mark: The point of Net Neutrality is also that all *sources* of traffic be treated equally. As a comcast user i should have the same access to Akamai’s content as i do to Level 3’s content. Remember that Level 3 is already paying for their bandwidth (they’re maintaining their own servers, etc.). If Comcast can’t find a way to be profitable with the amount of bandwidth they’re serving, they need to raise the rates for their subscribers, the people who are actually consuming Level 3’s bandwidth.

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      1. Jim, I have to disagree. Both sides (consumer and provider) should have a stake in paying for bandwidth utilization/transmission. The electric utilities have been doing so for a long time.

        IPV6 will help, but will not solve this problem, since there will inevitably be disagreements on classification and sub-segmenting of traffic beyond what IPV6 allows. But it’s a start.

        Additionally, while we bash Comcast and the infrastructure providers as being “greedy”, their operating margins are a FRACTION of those of Google et al (and yet they still pay a whole lot more in taxes than Google, but that’s another story).

        There does need to be a tiering of QoS and pricing based on the nature of the content if we’re ever going to enable mission critical applications to leverage the public internet (telemedicine, smart transportation, smart energy and water distribution, etc.).

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  5. @Tony Content delivery network

    super post thanks for the info!

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  6. Most peering relationships have stipulations that if there is an imbalance, then the company responsible for the imbalance pays.

    The irony of Level 3 doing this is that they’ve been on the “comcast side” of this a couple of times, including when they went as far as temporarily cutting off their relationship with Cogent in 2005.

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    1. Man, who hasn’t cut off Cogent? :)

      Anyhow, the imbalance issue is real and I tried to address it in the story, however I do want more information on what Comcast charges Akamai and what those fees actually buy. Comcast makes it seem as if Akamai can undercut Level 3 simply because it doesn’t pay a CDN fee, but Level 3 does own its own network, which Akamai doesn’t. Akamai buys bandwidth from folks like Level 3. So even if if this Comcast fee is charged to both Akamai and Level 3 as CDNs, Level 3 should still have a price advantage.

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      1. Why should you, a blogger, have the right to ask for proprietary and sensitive information such as a contract between Akamai and Comcast? Further, why should you (or anyone for that matter) get to decide if these contracts are “fair”? My favorite part is how you blame Comcast for the lack of competition. Blame local governments for restricting entry!

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      2. Well, she’s actually a journalist who happens to work for a news site operating on a blog platform. Regardless, this is America; anyone is entitled to ask questions, it’s up to the other side to decide if it wants to respond.

        But back to the point: If Akamai has a different peering agreement with Comcast, isn’t that just the free market in action, i.e. Akamai did a better job of negotiating its contract? Could this really be all about Level 3 trying to gin up public leverage pursuant to renegotiating its deal with Comcast? Or is there some law/regulation that all peering agreements are supposed to be equal?

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  7. My, how quickly they forget. I wrote a guest blog for GigaOm a year ago pointing out that the FCC’s proposed net neutrality rules could easily end up regulating peering and transit agreements, and now we see what? Net neutrality has been expanded by L3 to apply to peering and transit agreements.

    The comments to my guest blog featured adamant denials from employees of Google, Akamai, Netflix, YouTube and a host of frequent fliers to the effect that I was offering a wholly unreasonable interpretation of the Net Neutrality rules. I don’t want to say I told you so, but my goodness was I ever right.

    That blog post is: http://gigaom.com/2009/11/22/how-video-is-changing-the-internet/

    The comments are fun, especially those from Patrick Gilmore disputing his own published claims and Daniel Golding’s assertions that there is no possible way for net neutrality to affect network interconnection.

    What we’re seeing is the unbearable lightness of net neutrality: a vague cause that can be, and regularly is, redefined to cover all many of real or imaginary ills. Be careful what you wish for, kids. Net neutrality used to be about blocking access to web sites; now it’s about peering, retransmission consent for TV shows, down-level cable modem certification, and traffic engineering. What’s next, recycling and animal rights?

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    1. Richard, you’re right. I wish I had remembered your post last night. However, Level 3 hiding behind net neutrality is pretty bogus. This is not so much a net neutrality issue so much as a lack of competition issue. Although I suppose if we had real competition we’d also have less to worry about with regards to net neutrality because people would just switch providers.

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      1. morgan warstler Tuesday, November 30, 2010

        Stacey, Akamai pays big time to be inside cable headends, Netflix is not dumb, they knew full well L3 is on outside looking in….

        No mam, the baddies here are Netflix and L3, let them decide how much they’ll ante up to Time Warner to compete with Akamai, everyone has their price – let them pay it.

        There is NO free ride. One way or the other WE pay, stop siding with companies and let them fight each other to the death – and we’ll pay the least.

        The last time your type yammered on and on about this kind of thing, we had the Government investigating MSFT for giving away a browser Netscape wanted to charge $40 for.

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      2. There’s no difference between NN and the “lack of competition issue,” Stacy: The argument for NN all along has been that the ISP market isn’t sufficiently competitive for the market to discipline ISP behavior, so the government has to apply rules. I’ve always basically agreed with that, my beef is that the rules tend to not be narrow, clear, and well-focused. If cable modem certification and peering are NN issues, NN is too broadly defined.

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      3. @morgan warstler: Akamai isn’t inside Comcast’s cable head-ends and never was. Comcast doesn’t sell rack space, they interconnect at various places far removed from DOCSIS.

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    2. Next up in the complainer line-up, We have Bennet who it is said takes most of his consulting $ from “big telco” (e.g. AT&T). Again, obvious bias toward ISPs hoping to get $ from both content providers and consumers.Pretty straight forward.

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      1. coldbrew

        whatever your feelings about richard might be, but the issue at at the heart of this matter is going to impact all of us, the Internet users. :-)

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      2. I like the diverse crowd here, Om, you’ve got the full range.

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  8. so the internet gets owned by big companies and small guys will be kicked out if they don’t pay? What about economies of scale where Google gets preferential rates of say $0.01/mb and individuals pay $0.04/mb… Scary

    STOP THIS NOW

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  9. [...] ignorant groups like Media Access Project and bloggers like Stacy Higginbotham claiming that “Comcast might break the web” despite the fact that the kind of contractual agreement between Comcast and Level 3 is [...]

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  10. I agree that the lack of real competition in the broadband networks such as Time Warner Cable & Comcast have created monopolies where people are held hostage to them and their fees. We went through this before with the telephone company The Bell System, a.k.a. “Ma Bell”. The cable company franchising & licensing has to be changed to allow local competition. Competition has always driven prices down. The way it is working now is the towns, cities, etc are getting paid off by the cable company to allow a cable company an monopoly of their area under the disguise of an franchise.

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  11. Brett, you do see some of these problems don’t you? You have L3, Akamai and Limelight jamming more and more video traffic onto your network without paying you anything, don’t you?

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    1. Yes, I see the problem inherent in bandwidth-hogging content; in fact, I was the among the first small ISPs to speak about it. I was also one of the first ISPs to point out that there is often discrimination in the other direction. Akamai was (and is) discriminating against us and our customers by refusing to deal with US; they would not place a cache with us and thus greatly increased our backbone bandwidth load. This is a big issue for ISPs without nationwide backbones (and, therefore, without the ability to peer).

      What’s sad to see, though, is that publications like GigaOm toe the Google anti-ISP party line and are also prejudiced against (and even deny the existence of!) small and competitive ISPs. This is unethical and destructive. But, as I mention above, they obviously care more about getting the maximum amount of money from Google than they do about the truthfulness of their reporting.

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    2. @Brett: Rochester, NY, as cited in the article. Metro population nearing 1 million, and we have as options Time Warner and Frontier, as cited in this article. Ostensibly, I have a choice between the two, but my little suburban ranch is in a nice little area equidistant from two substations, putting me at the very end range of both of them. Having tried to lose Time Warner (we were the lucky ones who got the “tier trials”), it can’t be done. DSL put me at a level below AOL dial-up users with a 14.4 modem. I have no competition here. Zero. Forget FiOS; I just want options for cable! If I want to be able to work out of my home, as I’ve done for the past 11 years, I pay Time Warner, and that’s it. If I want Netflix streaming or Xbox Live or even porn, it’s all Time Warner. So yes, markets like this do exist, and anyone in telecom will point to Rochester as the face of what’s wrong with the industry in the first place.

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    3. Cyndy, I see three wireless broadband providers (WISPs) in your area – not including cellular. You’ve got quite a lot of options.

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    4. WISP coverage here is flaky, at best. As an example, I use Clear for redundancy since I work out of my home, and we have flaky electric here in inclement weather. The signal drops in and out even though I’m in a solid coverage area for them, so while I CAN watch a streaming video, I’m going to be restarting it approximately three times in the course of a 30-minute TV episode. It’s fine for working, where I won’t notice blipping out, but not anything that requires constant up-time. There is no WISP here that’s going to provide anywhere near the broadband capability of TWC, so competition on paper != actual competition.

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  12. Stacey – there is no risk of disruption here because Level3 already blinked. Level3 has an unfortunate history of backing down in the face of any and all peering disputes – Cogent/Level3 was the last and most interesting one.

    There has been significant “private” chatter on this subject and the consensus is that the risk of partition is non-existent at this time. There is significant disagreement, however, about who the “bad guy” is in this scenario. Comcast has been ham-handed in the past in regards to its network management and regulatory issues, but, as Patton said, “America loves a winner, and will not tolerate a loser” – Level3’s lack of intestinal fortitude and strategic thinking are not gaining them any fans. Their continued lack of relevance to the transit market exacerbates this.

    I was amused to see Richard Bennett’s post below, which goes out of its way to smear myself and Patrick Gilmore. Amusingly, Patrick and I are on two different sides of the network neutrality debate and rarely agree on politics. Richard’s scorn is rooted in his inadequacy to argue either side of this debate due to his absolute lack of subject matter knowledge. Sadly, this lack is rather endemic amongst Gigaom writers.

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    1. Finally, we have Golding rounding out the complainer list. Apparently, he works for a consulting/lobbying group called Tier1 Research, but is also an engineering professor of some sort. It isn’t clear, but from what I can gather Tier1 Research probably counts Akamai as a large customer. Akamai is the largest CDN, but doesn’t own any network. Akamai is competeing with Level3, and as a pure play CDN doesn’t have the transmission business that Level3 can use for leverage in negotiations. Level3 is said to have just beat out Akamai as Netflix’s primary CDN.

      Looks like all the food groups are represented. Go Teams!

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      1. LOL – I havent worked for Tier1 in about a year. I’m an investment banker at this point, and Akamai is not my customer, nor do I work with CDNs. It is unlikely Akamai will ever be my customer in any capacity, in the future.

        But thanks for anonymously accusing me of corruption. Very brave. I assume this is a sock puppet.

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    2. First off, I’m not anonymous (privacy is dead, remember?). If you can’t attempt to address or clarify the factual statements and assumptions I’ve made without ad hominem attacks I don’t think it makes your case stronger. There were no claims of corruption on my part, only an attempt to show possible conflict of interest. I used the quickest/ trustworthy source I had (circleID acct). With all the opinions you threw around (Level3 is weak, comcast is ham-handed, etc) in your first comment, I thought it only fair to know something about your background since you didn’t bother to disclose any of it. you seem to have some inside knowledge that would be interesting, but it seems like you’d rather talk around it.

      Sock puppet. Indeed.

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    3. There’s no need for smearing, Daniel Golding, all the readers have to do is read your claim that NN would never be used in peering disputes in light of this event to see how good your forecasting skills are.

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  13. Stacy, do you ever proofread your work? The first sentence has a typo, there are subject/verb agreement issues, and the list goes on. Maybe the editor’s asleep, but does it really require two people to create coherently edited writing?

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    1. just.a.guy ironic that you didn’t proof read your comment.

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  14. Phillip Bradham Tuesday, November 30, 2010

    Level3 tried the same thing with Cogent Networks back in 2005, I know first hand:
    http://www.zdnet.com/news/blackout-shows-nets-fragility/144973

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  15. This isn’t really about Level 3 being both a transit provider and a CDN. This is purely about whether or not Comcast is going to pay for peering with them. Comcast is trying to become more of a content originator, but still has and likely always will have a significant disparity between inbound and outbound traffic, regardless of who they peer with. L3 has played games with this arrangement many times in the past, and can completely control exactly how much traffic is delivered over ports they control on the Comcast network. It makes no financial sense for L3 to get this for free, especially since Akamai and Limelight pay for the traffic they’re sending Comcast. By the way, Akamai does not have servers inside of Comcast’s network last I heard, and Limelight uses a different model which looks more like L3’s. So all three CDN’s should be on equal footing.

    Netflix’s traffic will be carried by Limelight if it’s not carried by Level 3. Customers will be fine. Level 3 will be the loser in this, they bid significantly lower than cost in order to fill CDN capacity with Netflix’s traffic, and because they don’t have the financial controls to really understand just how much it’s going to cost them to deliver that traffic.

    Now they’re realizing just how expensive it is, and probably regretting that they ever claimed they could sell CDN for the same price they sell transit. All of their sales people use price as their ultimate competitive “advantage”, instead of selling on value. This was purely dumb, and they will probably sell the CDN business at some point as a result.

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  16. I can only assume as an outside observer (though obviously, I’m an ISP customer) these people complaining in the comments here have agenda’s different from my own. Perhaps not, but simply writing highly opinionated comments without noting any significant facts draws my suspicions. As such, I will reply to each of them, pointing out to fellow readers what conflicts of interest I believe are at play.

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  17. First up, we have Glass who operates a small ISP in Wyoming. Obviously, he wants to be able to charge his local customers for web access, and he wants to be able to charge content providers that his customers access. He doesn’t seem to understand that he could do a lot more for his cause by explaining to us all of the issues he has and laying out as much detail as possible.

    Be specific, Glass! Don’t claim silly conflicts of interest where there is ZERO evidence. It makes you look ridiculous and will not gain you sympathy,

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  18. The problem with net neutrality or any kind of “regulation” is that it causes what it was intended to regulate against. They sound good and right on the surface, but what they actually do is discourage capital from entering a market, especially in such a capital intensive market as laying the cable for the “last mile” as it were. The Telecom Act of 1996, which itself sounded good on the surface, the fact that it made incumbent telecoms sell their lines at cost to upstarts, seemed like it would encourage competition, but it really did the opposite: Fresh Capital hit the exits and has never returned. This leads to the worst of both worlds: The “Unearned” Monopoly, such as Comcast, that not only causes harm in its own market, but also can effect the rate or lack thereof innovation in all sectors of our economy, which is in effect where we get the standard of living in our day to day lives.

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    1. Yep. It’s yet another case of unintended consequences caused by government regulation which have created the very problem the laws were supposed to prevent. And now folks want the government to “fix” it yet again. Unfortunately the regulators will just make things worse.

      If the government truly got out of the way and stopped meddling with the commerce of the web, both infrastructure and content, there would be some very unpleasant short term volatility. But the market would settle out before too long and the resulting growth would end up being staggering.

      The companies aren’t the problem here, though I suspect both sides are playing a PR game more than anything to protect their interests.

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  19. As I understand it Comcasts complaint is that a contractual agreement on traffic ratios (or peering ratios) has been violated. Most ISPs peer with an agreement in the traffic asymmetry not to exceed 2:1 (approx). So if L3 now with Netflix partnership suddenly violates this agreement doesn’t Comcast have a right to charge? Dont we live in a free economic society (actually take that back we dont anymore)?

    This is a standard peering practice and all ISPs (including L3) are fully aware and abide by it normally (be careful for what you ask for L3….)

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  20. Kristopher Kortright Tuesday, November 30, 2010

    At the end of the day it costs Alot of money to push data across broadband pipes. If that traffic is suddenly doubled because a new content service wants to push data across my network, I am NOT obligated to “give it away for free”.

    That’s the real rub here – high speed data is already CHEAP, the margins are not that high and the 1% of Abusers that consume 95% of the bandwidth created this kind of scenario in the first place (forcing the companies to start looking at charging for bandwidth). At the end of the day the internet is not only Not cheap to provide, but is in fact so expensive now with the rising cost of gear that high-speed data is not even that profitable anymore – bandwidth limits (or charges for excessive use) are a reality, no matter how hard we whine and argue that the internet should be free – it simply isnt.

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  21. In the traditional telecom world of voice traffic, international carriers and PTT’s would set a settlement rate for excess traffic terminated to the other party. While this process has been highly convoluted and created in many cases artificially high international long distance rates , it may be what ends up happening in the IP space as well. Remember that most ISP’s were telcos first. At a certain level, the concept makes sense. If one carrier routes more traffic to another then the excess traffic should be compensated for in some manner.

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  22. The absurdity knows no bounds. We pay for “unlimited” Internet access – and then get charged for “abnormal” usage. We pay for “up to” specific speeds, and usually get half that or less. They don’t allow customers to host their own sites, even though that would save them a lot of infrastructure and headaches. Now companies are charging to deliver other companies’ content – isn’t that backward? Their customers are paying them to deliver content THAT THEY ARE OFFERING AND EVEN PROMOTING – and instead of them paying for content they are charging to consume it? It staggers the mind. This is all so, so very wrong.
    Here’s an idea: if the ISPs are going to charge for data, they should also be forced to refund for bandwidth NOT used, and especially for what is not actually provided. If you’re paying for 7MB service and only getting 3.5, then your bill should be cut in half. If your data cap is 100MB and you only use 50MB, your bill should be cut another 50%. How’s that for fair and neutral?

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    1. Agreed.

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  23. “One can wonder if Akamai’s CDN fees are calculated on the traffic it sends to an ISP or how much space its servers take up in the ISP’s data center”

    This is flat out ignorant and has little to do with how commercial peering agreements work.

    No need to wonder, Akamai paid on traffic.

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  24. Wow Brett, thats some crazy tinfoil hattery there.
    What evidence do you have that Google has anything to do with this article monetary or otherwise? You remove your own credibility by exposing the fact that you own/run an ISP so you have your own agenda in this fight, namely to double-dip the consumers AND the content providers for more and more fees.
    In short, you and other ISPs want to have your cake, and eat it too.
    Certainly there are other third party ISPs around, but almost every single one of them are just reselling services from a major carrier, like Comcast, AT&T or others, then re-branding it as their own, and charging far more than the service they resell.
    This fight is about money, and how much more of it the ISPs can wring out of everyone involved, no matter who wins this fight, the consumer is going to lose. Increased costs passed on from the ISPs because they cant soak the content providers, or increased costs from the providers because the ISPs are going to hold them hostage from delivering PAID FOR CONTENT to the consumers.
    This is the same thing as paying rent for an apartment building you live in, but the apartment owner demanding more money from the resident or USPS for the privilege of receiving mail or they will stop the postal carrier from getting to your mailbox.

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    1. Another analogy: you sign an agreement with some postal carrier, say UPS, to deliver all packages to and from your residence for a flat monthly rate.

      However then UPS notices that most of the packages it delivers for you come come from a few key distributors. UPS threatens not to deliver any packages from those distributors unless they pay a premium to UPS.

      It really is that ridiculous.

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    2. No, it’s like paying a monthly fee to have a phone (land-line or cellular, doesn’t matter) and then paying a per-minute charge for calls.

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    3. “you obviously know nothing about the ISP business, or you would realize how ludicrous your statements above are.”

      So…explain it?

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  25. I’m really fed up with all the complaining about bandwidth usage, not to mention the outright lies that bandwidth usage is expensive. The truth is that the infrastructure/hardware is expensive, but the data itself costs very little to transmit. The plain and simple fact is that communications in general and the Internet in particular is going to have to morph into something a whole lot more end-user-friendly. Communications and networking are not going to diminish, and SURPRISE!!! that all takes bandwidth. This is not news. We’ve been very aware of this for at least 15 years. The problem is that the profit motive is killing the industry rather than providing competition or stimulating technical innovation. Instead of concentrating on finding and implementing technologies that will make bandwidth a non-issue, everybody is concentrating on finding new ways of charging everybody else insane amounts of money. This is not helpful to anyone.

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    1. You have the right idea. The hardware costs have been dropping every year, yet Comcast has only raised their price. The cost to run fiber links has dropped, and router prices are dropping. The problem is that Comcast and other providers have monopolies. The city governments gives them this monopoly, I guess we should vote them out.

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      1. But how much of Comcast’s expenses are actually related to the hardware? How much is salaries, health care, taxes, electricity costs, etc?

        And while unit cost of equipment may be dropping, are the quantities increasing?

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    2. Yes, anymore it seems the maxim ‘work smart, not hard’ is being unfortunately and intentionally misread as ‘screw people over, don’t innovate’.
      This is always a bad thing, and when it happens on a massive corporate level, we end up in situations like these.

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  26. I would like to connect my neighborhood with gigabit fiber, but if I did this the city would send out their workers and cut up my fiber links. It is against the law to connect data links between the neighborhood houses. Someone needs to attack the cable companies and remove this law. (The cable companies will leave any city that does not give them monopoly rights).
    I should move to a small city to set up this local network.

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  27. [...] be dealt with a settlement-free agreement. Stacey had a good write up on how this dispute underscores the need for more competition and could ultimately break the [...]

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  28. I wish that I still had Comcast, due to where I live now I’m stuck with dial-up, WildBlue, or Hughes-net…

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  29. I think this dispute is getting blown out of proportion (perhaps deliberately so by Level 3). Smells to me like Level 3 made a bad deal to win the Netflix business from Akamai and Limelight (including the assumption of fixed storage costs), based on certain assumptions about their own costs to deliver the level of service they promised that are now turning out to have been incorrect. It is now panicking over how to make the numbers work internally and is trying to bait the FCC into bailing it out of a bad deal by waving the bloody shirt of net neutrality.

    The tell here is that Netflix has said nothing about the dispute. Does anyone seriously think that if Netflix believed its streaming business genuinely was being threatened by Comcast for strategic or competitive reasons (as opposed to a simple price dispute) that it, too, would not be jumping up and down about it?

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    1. Or maybe Netflix is keeping its mouth shut to stay under the radar and reduce the chance of people asking hard questions about how much they knew about Level 3’s plans.

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      1. Either way, Netflix is not acting as if it sees itself as threatened by Comcast. That’s the key point.

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      2. This sentence from Level 3’s own press release also tells me Netflix did not have its back on this one:

        “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.”

        Why would Netflix not have Level 3’s back here if it thought this really was a net neutrality issue?

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  30. [...] signed an agreement to act as the content delivery network for Netflix. But many believe it has the potential to change the way the web works. Over the next few hours and days, many people will weigh in on the issue and many new insights [...]

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  31. “… denying the existence of competitive ISPs …”

    Boy, I wish I had “competitive ISPs where I live. In my neck of the woods, a metropolitan area approaching a million souls, there are only two: Comcast and Qwest. Both have something to loose when third-party content providers like Netflix use their pipe’s to deliver content. (Qwest is partnered with DirectTV in my location.) Currently I’m paying Qwest three times the amount for half the bandwidth I got when DSL first became available in my neighborhood. Comcast would be even more expensive.

    I like you believe that free markets are the best solution to the issues that Stacey Higginbotham brings up. However, free markets only exist where there is true competition and consumer choice. That hardly applies to the duopoly which is most U.S. broadband markets.

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    1. There is no US city with a population of nearly a million that does not have MANY competitive options. That you are ignorant of them does not mean they do not exist.

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  32. [...] Forget Net Neutrality, Comcast Might Break the Web The fight that erupted today between Level 3 (s lvlt) and Comcast (s cmcsa) involves an esoteric agreement between two [...] [...]

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  33. [...] 3 is alleging that Comcast is trying to do away with the open Internet by demanding Level 3 pay it for transit. Comcast on the other hand is taking the stance that this [...]

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  34. [...] are piling onto Comcast but I am thinking they are wrong.  There’s one section in this post that blows Level 3′s arguments so full of holes swiss cheese looks [...]

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  35. [...] on the fracas. (The link to Vijay’s post on peering policies is a good read, btw, for those of you with [...]

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  36. You say “Comcast wouldn’t deliver Level 3′s content” if fees aren’t paid and that isn’t quite true.

    Level3 (and Comcast) are looking for mutually advantageous interconnections that improve transport speeds. If Level3 refused to pay the fees for the special peering arrangement, Comcast would still accept their traffic, just not at the more-desirable interconnection points. If Level3 and Comcast had the same kind of traffic, their advantage in the proposed interconnection would be the same. The fact that Level3 carries Netflix traffic means that the interconnection is more important to Level3 than Comcast, which does not have a Netflix-like customer. Since it is more important for Level3’s business than Comcast’s, Level3 pays.

    You had better believe if Comcast had the Netflix contract, Level3 would be asking Comcast for money.

    But the fact that the traffic will, in fact, be exchanged between Level3 and Comcast, either according to current backbone interconnects or according to the new peering interconnects, this IS NOT a net neutrality issue.

    This isn’t really even news. Backbones tussle over settlement-free peering all the time, since the beginning of the commercial Internet. The fact that Level3 brings the argument out of the smoke-filled backroom doesn’t make it newsworthy, extraordinary or suspicious.

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    1. I agree this is not a net neutrality issue.

      Some folks have brought up telco termination fees where orignating networks pay terminating nwtroks. That’s based primarily on calling party pays.

      Well, the calling party here is the subscriber. I’m calling Netflix, and I’m paying my ISP for the privledge.

      And I’m pay a subscription fee to Netflix, so they’re happy to terminate my “call.”

      CDN biz is to get content across the internet – to bypass internet bottlenecks. Netflix is happy to pay for that too…

      The reason Comcast is going after L3 is the concentration of traffic; they have requested so many ports, it’s practical to charge them — and L3 CAN pay because they are being paid by Netflix.

      If Netflix didn’t use a CDN their traffic would still go thru Comcast…it would just come thru more entry points, which would make it harder for Comcast to charge any particular entity….Other than Netflix, and then we’d have a net neutralty issue??

      I know many folks hate Comcast, but I think Comcast’s biz arguements hold some water…

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  37. This is about more than a battle between Content Distribution Networks (CDN’s) and Internet Service Providers (ISP’s). The day is coming when video customers will abandon old-fashioned video services like cable companies. Comcast is preparing for this day by trying to change the precedent from what was once unlimited internet service to tiered, usage-based service. Comcast also wants to triple-dip and charge end-users, content providers AND CDN’s for the extra bandwidth required to deliver video, to makeup for lost business when video services are delivered via other providers — partially using Comcast’s bandwidth.

    I don’t begrudge Comcast receiving a fair fee. But Comcast has overcharged video and Internet customers for years while delivering poor service and cheating customers on bandwidth. The company is fundamentally dishonest and cannot be trusted to manage our digital infrastructure.

    Congress simply MUST step in and separate the information highways from the content providers.

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  38. Take a peek back in US history and you will find a group of individuals that believed that land could not be owned. Those friendly natives where soon driven from the land they did not own and today are caged on land given back to them. But what can they argue, they didn’t believe that land had ownership. Someone else created and quantified a value for land and divided it up.

    Complain as users may, arguing that the internet should be free for everyone will only get you a piece of a smaller pie. If you don’t believe in ownership then what can you say when someone that has created ownership? Those that can create, quantify, and ration out internet space will eventually put a price tag on it. If you want more than the guy next to you there will always be a way to find more, if one is willing to pay for it.

    Ultimately, if a provider can own a back bone of the net then they can fence that section off as they see fit. Like it or not. There are owners on the net. If you like owning a domain then you might stop and consider that land in the US was once given away for free or next to nothing. Some of that free land has developed into high traffic metros. Key backbones of earth now are some of the highest priced commodities available.

    If we are allowing ownership then get use to those that own. If you don’t like it, make your own.

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  39. [...] Forget Net Neutrality; Comcast Might Break the Web The fight that erupted today between Level 3 (s lvlt) and Comcast (s cmcsa) involves an esoteric agreement between two [...] [...]

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  40. [...] signed an agreement to act as the content delivery network for Netflix. But many believe it has the potential to change the way the web works. Over the next few hours and days, many people will weigh in on the issue and many new insights [...]

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  41. [...] Level 3 calls for conditions on Comcast/NBC deal Comcast’s Dec. 17 Letter to the FCC The Real Story Behind the Comcast-Level 3 Battle Updated: A Play by Play on the Comcast & Level 3 Spat Forget Net Neutrality; Comcast Might Break the Web [...]

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  42. Will Comcast be able to charge monopoly rents for access to its customers?…

    I would definitely question the assertion that any aspect of this is “very basic.” If this were a clean and simple peering dispute, I doubt GigaOm’s Stacey Higginbotham would have said that “what began as a commercial dispute may end up fundamental…

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  43. [...] Global Crossing has weighed in on the peering debate in a Friday letter to the FCC that argued ISPs were trying to use peering as a smokescreen to charge content delivery networks and web service providers more for access to their subscribers. The backbone provider submitted its comments tied to the argument between Level 3 and Comcast that essentially questions who should pay for the increased traffic load associated with delivering Netflix content to Comcast’s 16.7 million broadband subscribers. This is the two-sided business model I argued that Comcast was trying to implement when I said the Comcast Level 3 argument might break the web. [...]

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  44. [...] Global Crossing has weighed in on the peering debate in a Friday letter to the FCC that argued ISPs were trying to use peering as a smokescreen to charge content delivery networks and web service providers more for access to their subscribers. The backbone provider submitted its comments tied to the argument between Level 3 and Comcast that essentially questions who should pay for the increased traffic load associated with delivering Netflix content to Comcast’s 16.7 million broadband subscribers. This is the two-sided business model I argued that Comcast was trying to implement when I said the Comcast Level 3 argument might break the web… [...]

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  45. [...] FCC Chairman Genachowski said that the Level 3 and Comcast debate over access to Comcast’s last mile subscribers is a business issue and not a net neutrality issue. For the implications of this fight, refer back to our previous coverage. [...]

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  46. [...] Level 3 and Comcast have been in a stand-off over peering issues since last November, when Level 3 alleged that the cable company was “putting up a toll booth” by charging for Level 3 traffic going over its network. Comcast has disputed this notion, saying that this was a regular peering practice and that the traffic coming from Level 3 had increased exponentially in the weeks leading up to the dispute. [...]

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