Level 3 May Test ‘Open Net’ Rules

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
to 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 (see “FCC Delivers on Network
Neutrality,” Jan. 3).

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

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

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’s 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.”

Meanwhile, Level 3 last month also asked the FCC and
the Justice Department to impose conditions on Comcast’s
proposed NBC Universal joint-venture deal that would
guarantee large backbone providers that meet certain criteria,
like Level 3, won’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.


Provider of fiber-based communications
services, including Internet backbone
and content delivery

Network assets: 54,000 intercity route miles
of fiber; about 125 metro fiber markets
with 27,000 route miles

Revenue: $912 million for quarter ended
Sept. 30, 2010

Employees: 5,300

SOURCE: Company reports