Level 3 May Test FCC 'Open Internet' Rules In Comcast Fight

1/13/2011 4:58 PM Eastern

Level 3 Communications could mount the first major challenge under the Federal Communications Commission's recently adopted network neutrality rules, as the Internet backbone provider continues to accuse Comcast of improperly demanding payment to deliver content.

The dispute has implications for all Internet network providers and content companies. If Level 3 prevails in convincing regulators that Comcast shouldn't be allowed levy fees on networks that offload a disproportionate amount of data, it would change the economic model for how traffic is exchanged on the Internet.

Level 3 argues that the FCC's network neutrality rules, adopted Dec. 21 in a 3-2 vote, explicitly forbid Comcast and other residential broadband providers from charging anyone a "toll" to reach consumers.

In its fight with Comcast, "we may decide to proceed under the Open Internet Order, or we may decide to proceed otherwise," Level 3 executive vice president and assistant chief legal officer John Ryan said in an interview. "Our objective is to get to the point where the parties have agreed on a fair and reasonable interconnection regime that doesn't require a toll for the delivery of content to Comcast eyeballs."

Asked to respond, a Comcast spokeswoman said the company is continuing to have discussions with Level 3 but otherwise declined to comment.

The fight started in late November, when Level 3 issued a statement complaining that Comcast was demanding payment to deliver additional traffic. That came after Level 3 landed a contract as one of Netflix's primary content delivery networks, and requested up to 30 new 10 Gigabit Ethernet ports of capacity from Comcast -- for no additional cost, under their existing settlement-free peering arrangement.

In short, Comcast said, Level 3 was asking to dump twice the amount of traffic on its network without paying customary CDN fees. "Everyone knows that networks have investments and costs to operate over the longer term; Level 3 effectively demanded unlimited capacity at our cost," John Schanz, Comcast executive vice president of national engineering and technical operations, wrote in a Dec. 16 blog post.

But Level 3 asserts the FCC network neutrality framework "directly implicates Comcast," Ryan said.

Under the Open Internet Order, "ISPs can't charge Google or YouTube or Hulu directly for access to their subscribers," he said. "Our position is that a charge on their carrier, Level 3, is effectively the same thing."

The FCC order says: "To the extent that a content, application, or service provider could avoid being blocked only by paying a fee [to a broadband provider], charging such a fee would not be permissible under these rules."

The FCC's network neutrality rules are expected to be challenged in court, but the agency is reportedly planning to include a separate "open Internet" condition on Comcast as part of the NBC Universal deal.

Previously, in filings with the FCC and in public statements, Comcast officials said the disagreement with Level 3 concerns business terms -- not network neutrality.

"This dispute has nothing to do with the content of the traffic Level 3 sends to Comcast. Rather, it is about the volume of traffic, or more precisely, the grossly disproportionate traffic ratios between the parties, and how the related capacity costs should be shared," Comcast vice president of legal regulatory affairs Lynn Charytan wrote in a Dec. 29 ex parte filing with the FCC.

Level 3, Charytan continued, wants to use "regulatory gamesmanship to change the rules of the road that have long governed Internet peering -- the same rules that Level 3 has invoked when others sought to saddle Level 3 with the costs of a significant traffic imbalance."

Level 3's Ryan said his company is seeking only to deliver traffic that Comcast's customers have requested, as close to subscribers as possible. "I always laugh when Comcast says, ‘Oh my gosh, you're sending me far more traffic than I'm sending you,'" he said. "That's the way the Internet works."

Meanwhile, Level 3 last month also asked the FCC and Dept. of Justice to impose conditions on Comcast's deal for NBCU that would guarantee large backbone providers like Level 3 that meet certain criteria wouldn't have to pay Comcast to deliver Internet traffic for five years.

Comcast replied that the Level 3 issue is absolutely irrelevant to the NBCU deal.

"Level 3's attempt to interject this dispute into the NBCU transaction review is grossly improper," Charytan wrote in Dec. 17 comments with the FCC. "[N]ot a single party raised Internet peering issues as a matter pertinent to Comcast's proposed joint venture with GE regarding NBC Universal (until Level 3 first made its allegations against Comcast a few weeks ago)."

Level 3 maintains that NBCU is germane to the interconnection dispute because after the deal, Comcast will have an even greater incentive to engage in discriminatory action against competing content providers.

For now, Level 3 is paying for the additional capacity it requested from Comcast.

"Until we get relief in the way of an agreement with Comcast, or relief from somebody in the Dept. of Justice or the FCC, we'll continue operating under those agreements," Ryan said.


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