Comcast Open To FCC's Participation In Resolving Level 3 Dispute

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Comcast is willing to have the Federal Communications Commission oversee negotiations with Level 3 Communications to resolve their dispute over Internet interconnection fees, the cable operator said in a letter to the agency Tuesday.

"[W]e have not given up hope that Level 3 will make a reasonable business decision in the context of the parties' overall commercial relationship... Commercial resolution is the appropriate path forward here," Comcast said in an ex parte filing with the FCC.

"Nevertheless, if we are unable to resolve the issues satisfactorily in these conversations, we would be pleased to participate in a meeting between the parties overseen by and with the participation of Commission staff if that will facilitate a better understanding of the matters at issue," Comcast said.

Level 3 on Monday issued a press release complaining that Comcast had demanded a recurring fee to deliver Internet video to its customers. Comcast responded that Level 3 was trying to avoid paying standard content delivery network fees, after it recently inked a deal with Netflix to become a primary CDN provider.

Separately Tuesday, FCC chairman Julius Genachowski said the commission was looking into Level 3's dispute with Comcast. Level 3 has not yet lodged a formal complaint with the agency on the matter.

In its filing Tuesday, Comcast said Level 3's position "is not based on any principles of fair-play on the Internet, but instead is merely the result of its rash bid to carry Netflix traffic at radically low rates, based on the flawed assumption that it could use its Tier 1 Internet backbone status to cram its CDN traffic onto others' networks on a settlement-free basis."

The letter, sent to FCC Wireline Competition Bureau chief Sharon Gillett, was signed by Joe Waz, Comcast senior vice president of external affairs and public policy counsel, and Lynn Charytan, vice president of regulatory affairs for the MSO. The ex parte filing summarized a call between Gillett and Comcast on Monday.

Level 3 also had a teleconference Monday with Gillett, who spoke with Level 3 assistant chief legal officer John Ryan, according to an ex parte filing.

Among the flurry of back-and-forth statements, Level 3 asserted that the dispute between the two companies isn't about network-peering terms but whether the MSO should be allowed to set pricing for network access.

Comcast said the large increase in the amount of traffic Level 3 wants to send to Comcast's network on a "peering" basis -- about twice previous levels -- would throw traffic between the two networks grossly out of balance. As such, Comcast asked Level 3 to enter into commercial negotiations to achieve a solution that accounts for the traffic imbalance. CDN providers such as Akamai Technologies and Limelight Networks typically pay interconnection fees to other ISPs.

"What Level 3 is suddenly pushing -- a ‘new theory' of peering -- would throw the traditional, 'balanced traffic' peering rulebook out the window, give Level 3 an unfair cost advantage over its competitors, and shift all of the costs from Level 3 and its content customers onto Comcast and its high-speed Internet customers," Comcast said in the filing.

Previously Comcast and Level 3 exchanged Internet traffic as part of a commercial interconnection agreement, under which Comcast paid Level 3 for interconnection facilities, according to the MSO. Although Comcast terminated more of Level 3's traffic than vice versa, that was well within the industry's established bounds for "roughly balanced" traffic and they exchanged their on-net traffic on a settlement-free basis, Comcast said.

After Level 3 signed the Netflix deal it approached Comcast to demand 27 to 30 new interconnection ports -- for free -- which would allow it to send a much greater amount of traffic onto Comcast's network. The MSO said it provided Level 3 with six ports at no charge that happened to be available and were not budgeted and forecasted for Comcast's wholesale commercial customers.

To accommodate the additional ports Level 3 requested, Comcast offered 20 ports under a commercial arrangement. Comcast said providing new ports to handle additional Internet traffic requires incremental 10 Gigabit Ethernet interfaces, line cards, router slots and optical backhaul capacity. Supporting a new port involves capital costs of about $50,000 and ongoing recurring costs of about $25,000 a year, according to the cable operator.

"The issue here, however, is not the initial cost of the ports, but the ongoing costs involved in carrying imbalanced traffic over the long term," Comcast said in its filing.

Also Tuesday, Waz posted a list with "10 Facts about Peering, Comcast and Level 3" on Comcast's corporate blog site, seeking to dispel misconceptions about the MSO's policies on delivering video content to subscribers.

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