Were Level 3’s Charges Against Comcast Overblown?

Yesterday, Level 3 created a stir by accusing Comcast (NSDQ: CMCSA) of violating net neutrality. Today, the row between the two companies is looking a lot more like a garden-variety commercial dispute that has little to do with net neutrality.

Level 3 had complained that it was getting unfairly pushed into ponying up some extra cash to move its content over Comcast’s network. The cable provider’s move was a violation of the principle of “net neutrality,” Level 3 said, and even suggested the move was a step towards “a ‘closed’ internet, where a retail broadband internet access provider decides whether and how their subscribers interact with content.”

But the dispute between the two companies is about something known as peering, which is a lot less sexy than net neutrality. Granted, that’s how Comcast wants it to appear. But it’s certainly true that asking for compensation for unbalanced “peering” connections is not without precedent, which is how Level 3 made it sound. Level 3 started off its statement by saying that Comcast would demand this recurring fee “for the first time,” making it sound like a highly unusual request, which is how I and many others reported it.

Peering is the practice of networks moving along the traffic of another network’s customers to its destination on the internet. Without it, the net couldn’t operate. And when one network is asked to carry much more than the other, it isn’t unusual for the higher-traffic network to make a payment. That’s what Comcast asked for after Level 3’s traffic was set to more than double.

The company has posted a video with a senior engineer explaining the peering process, as well as 10 Facts About Peering, Comcast, and Level 3, a list that emphasizes that Comcast isn’t going to block online video or create special charges to watch video online.

There’s also Comcast’s letter to the FCC, authored by its head of public policy, Joe Waz. That letter contests Level 3’s assertion that the disagreement is about “toll booths” or a threat to the “open internet.” Rather, it’s about Level 3 wanting 27 to 30 more interconnection ports to carry the extra traffic it’s carrying thanks to the deal it recently struck to carrying Netflix (NSDQ: NFLX) traffic-and wanting the ports for free. Comcast has granted six ports already, but negotiating continues over the remainder. According to Comcast, adding 20 more ports for Level 3 would have annual costs of around $500,000.

Like other content delivery networks or CDNs, Level 3 simply sends a lot more data to Comcast’s network than it accepts in return, and ought to pay something for it. But instead, Level 3 is trying to get a leg up on its competitors with a move that would “seriously disrupt the settled economics of internet traffic to meet its new business plan,” writes Waz.

Level 3 responded to Comcast’s response, insisting that this whole episode truly is more than just a peering dispute-it’s about making sure that “freedom is preserved” for Comcast subscribers. While yesterday’s release made Comcast’s move sound unprecedented, today Level 3 seems to be complaining more about Comcast’s size and influence-complaining that Comcast is “unilaterally” setting the price of the peering, and as the largest cable company with “absolute control” over access to its broadband subscribers.

But Comcast’s peering policy been posted online since January, and its competitor AT&T (NYSE: T) also has a peering policy of not carrying others’ traffic at more than a 2:1 ratio without asking for “suitable actions to balance transport costs.” Those suggest this really is standard operating procedure.

Level 3’s portrayal of the issue as connected to net neutrality comes at a very sensitive time for Comcast, which is waiting for government regulators to approve its merger with NBC-Universal. And the company has the attention of at least one powerful person — Senator Al Franken, D-MN, who shot off a letter to the Department of Justice and the Federal Communications Commission condemning Comcast and asking for Level 3’s allegations to be investigated by the feds, according to The Hill. Franken has called net neutrality the “free speech issue of our time” and has been a long-standing opponent of the Comcast-NBC (NYSE: GE) merger.