Comcast Squeezes Money From Level 3 For Streaming Video

Skeptics have called the idea of net neutrality “a solution in search of a problem,” suggesting that when supporters of the concept are pressed for actual examples of ISP abuse, there are few examples. Today, net neutrality supporters have a powerful new rebuttal to that argument. Content delivery network Level 3 Communications, which provides streaming video for companies like Netflix (NSDQ: NFLX), has stated publicly that cable provider Comcast (NSDQ: CMCSA) demanded earlier this month that it begin payment of a “recurring fee” for sending movies and other video content over the internet.

Level 3 was told about the new fees by Comcast on Nov. 19. Three days later, the company agreed to pay up-under protest-“in order to ensure that customers did not experience any disruptions.” But it clearly isn’t going to go down without a drag-out fight that’s already gone public, and will soon get political.

“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,” said Thomas Stortz, Level 3’s Chief Legal Officer. “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.”

Comcast responded with a statement saying that Level 3’s position is “simply duplicitous,” and that the company had misportrayed normal negotiations over the “peering” that happens when two separate internet networks interface. Level 3 wants to more than double the amount of traffic it is pushing through Comcast’s network, the cable company argues-and it simply wants to do so without paying. “In other words, Level 3 wants to compete with other CDNs, but pass all the costs of that business on Comcast and Comcast’s customers, instead of Level 3 and its customers,” the statement continues. Comcast also argues that it has “established and mutually acceptable” arrangements with Level 3’s competitors, and that it is treating Level 3 the same as other content delivery networks.

Level 3’s fee complaints could give fuel to those who are campaigning for “net neutrality” – essentially, a law requiring internet providers to treat all forms of traffic equally. The company already caused a small scandal in 2008 when it was found to be secretly interfering with BitTorrent traffic. But Comcast’s against Level 3 are a direct threat to a company that competes with it by transmitting competing movies and TV shows to consumers, and as such may prove to be more damaging politically.

Level 3 makes clear that it will seek redress from the government, saying it will approach regulators and ask them “to take quick action to ensure that a fair, open and innovative internet does not become a close network controlled by a few institutions with dominant market power.”

The FCC is tentatively set to consider new net neutrality rules at its next meeting on Dec. 21.

In a separate matter, modem maker Zoom Telephonics filed a complaint at the FCC alleging that Comcast is making its device-testing process deliberately difficult for small hardware manufacturers in an attempt to restrict competition in the device market. According to DSL Reports, several cable companies require testing for devices that will be connected to their networks, but only Comcast charges for the tests. And Zoom’s complaint says that Comcast has started requiring “tens of thousands of dollars for duplicative testing and related expenses (including business class air fare and expensive hotels).”