Comcast Declares War On Internet Video

November 29th, 2010 by · 14 Comments

Until now, network neutrality was largely a theoretical concept, a solution without a problem.  That era has ended.  In a statement from Level 3 Communications (NYSE:LVLT, news, filings) today, it has emerged that Comcast (NASDAQ:CMCSA, news, filings) is formally demanding payment for movies delivered over its network from an internet backbone and CDN provider in response to its own users’ clicks.  The target of this action isn’t really Level 3 of course, but rather Netflix (NASDAQ:NFLX, news, filings) and its brethren which have been making actual inroads recently by going over the top.  Whether they have made similar requests of Limelight Networks (NASDAQ:LLNW, news, filings), Akamai (NASDAQ:AKAM, news, filings), and others isn’t yet clear, however if they haven’t yet then they surely will sooner or later.

By leveraging its position as a last mile provider and establishing such an obvious toll booth, Comcast is forcing the Network Neutrality issue.  They’re doing so at a time when the Obama administration is at its weakest following the mid-term election drubbing and a year of completely useless dithering by the FCC.  And they’re doing it not by cutting off (and pissing off) their own customers, but by attacking what may be at present the most vulnerable of the major backbones and CDNs, one which can’t possibly fight back alone due to its debt position and resulting need for organic growth.  None of these are coincidental, Comcast has clearly been planning this for a while.

And Level 3 has immediately knuckled under while appealing for regulatory intervention to prevent the closing of the internet.  They will have to in some way pass on the costs to the content providers, but exactly how this money gets collected and transferred is unclear.  After all, Comcast doesn’t actually know what content was purchased or from whom when one of its customers buys a movie online and the bits start flowing.  So who writes the bill and itemizes it before sending it to Level 3?

At least now we have swept away the fig leaf of ‘reasonable network management’!  Now we are left with a stark choice whether a last mile provider can unilaterally tax content that is in competition with its own services over that last mile.  If they succeed, the obvious logical conclusion will be for AT&T and Verizon and the rest to follow suit, both for wired and wireless customers.

So what will Genachowski say?  And the rest of the vocal proponents of network neutrality?  And will the other internet backbones and CDNs follow Level 3’s path or might someone like Akamai fight back more directly?

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Categories: Content Distribution · Government Regulations

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14 Comments So Far

  • smaloney says:

    So Level 3 just starts charging Comcast for every packet that comes from their network

  • carlk says:

    I’m with Steve. How does (3) not get paid for doing all the heavy lifting X country again?

    This Comcast maneuver is a direct assault on freedom seeking, liberty loving Americans.

    It should not STAND if these regulators finally get their heads out of their butts!

    I do like how (3) is standing up for their “partner,” however.

    Netflix partner vows to fight Comcast fees 11/29 02:33 PM

    * Level 3 says Comcast (CMCSA:$20.21,00$-0.01,00-0.05%) demands fees for movie transmission
    * Says agreed to terms under protest
    * Taking issue up with regulators

  • Rob Powell says:

    What I can’t figure out here is just what the threat was. There is no contractual relationship between LVLT and Comcast other than fiber, colo, peering or transit right? If Level 3 refused to pay, what would Comcast’s recourse be – to cut off their own access to the internet? To sue LVLT for breach of a contract that doesn’t exist?

  • ddm08 says:

    Well, I think it’s time for Google to make its big push to build out on the last mile and undercut what the Roberts Family is doing:

    May be now would be a good time for Microsoft or even Apple to get on the Google wagon and use up their hoard of cash to do something similar to kill off these monopolists once and for all.

    The Roberts Family wants to have a toll booth at the content creation side by owning Universal NBC and another toll booth at the last mile access.

    Mr. Murdoch, Mr. Redstone, Mr. Malone, Mr. Miller, and Time Warner won’t be liking too much of what the Roberts Family is doing with this chess move. This is really a dumb move on their part!

  • mhammett says:

    Just tell them to piss off.

    There’s plenty of existing independent providers out there, no need to start throwing money at new entities.

    I hope this erupts big time, so my company has another edge over the big guys.

  • carlk says:

    It’s interesting that not until (3) was forced, almost by duress in the press, did they release Netflix’s name.

    Some have pointed to the difficulty of identifying what Comcast customers are representative of Netflix movies being purchased and when other than the HUGE WEIGHT on their network causing outages like last night, one might speculate. Other than that, (3) shut em down to send a message!

    Was Comcast under the belief system that Akamai’s poor QOS would be the death knell for Netflix?

    Not until (3)’s superior network was identified in the equation, did this despicable act come to the surface!

    Interesting times indeed.

    To all you regulators out there, get off your butts, and “do the right thing,” even though my name ain’t SPIKE LEE!

    • Rob Powell says:

      That LVLT might have preferred to keep the Netflix deal private is an interesting point, as one could argue it made them a more obvious target for this action by Comcast. But then they probably shouldn’t have had that teaser in their earnings CC!

      Nevertheless, I think it is simply Netflix’s rise and not recent deals for streaming that brought about Comcast’s action.

  • One has to believe this is also related to the fact the people are dropping their cable subscriptions in lieu of streaming services like Netflix and Hulu (which actually give people what they want instead of forcing a bunch of content they do not want down their throats). Cable subscriptions have dropped 2 consecutive quarters for the first time ever.

    Level3 should tell Comcast to pound sand. If Comcast is unhappy about their customers streaming videos they have three choices: raise rates, lower download speed, or add capacity to their network to ease congestion.

    The fact of the matter if MSOs start messing with the services that people actually buy broadband to enjoy, people will stop buying broadband from them.

  • Tommy2tone says:

    Boo Hoo for Level 3 the bully an the block. Now they have an excuse to declare bankruptcy as is their business plan. After they have put so many small companies and people out on the street, they want us to feel sorry for them?

    PS. 95% of the heavy lifting is done in the last mile. L3 probably has like 20 people working in any given state. Net neutrality legislation is anything but what its name states. Death to net neutrality, let people start paying for the real cost of their data usage.

  • JohnAKA_MrIP says:

    I don’t agree with the selective charging, but I do understand bandwidth caping. Bandwidth is not free and the load that it puts on the networks is not free. Your water is not on a ‘all you can eat’ basis, nor in your power. Change for the usage of bandwidth and move on. What people do the bandwidth us up to the end user.

  • Anonymous says:

    Comcast argues this is about ratios; just like Leve3 did v. Cogent. Both are/were stupid. What they fail to recognize is Level3 is not “sending” traffic to Comcast, it is Comcast’s users that are “requesting” content. The transaction begins with a request, which Level3 has no control over. Level3 could argue that Comcast users are causing an insane traffic flood of which Comcast should pay to receive the content on behalf of its users.

    • Rob Powell says:

      The ‘whose fault is the traffic’ argument is circular, after all it does take two to tango. In a healthy system, both sides would be glad to sell more, and all the middlemen in between too.

  • Adam K says:

    What will happen here if comcast wins is that you will be eventually forced to watch what they and their fat cat partners decide you can watch or download. It will be just like network television now. If net neutrality goes down, we will again be herded like sheep and led to be the cells that fuel their matrix. Netflix is just the beginning, if net neutrality is not maintained they win and every entrepreneurial individual that starts an idea that is in opposition to their programming will be choked out by internet toll roads and any other traps they can set to kill em off.

  • Adam K says:

    net neutrality keeps the playing field open to anyone. It is the means that keeps the internet unrestricted. I for one do not want to see censorship or selective segmenting of what is now a very free and open portal for every person and business out there to express or advertise themselves. Sure the last mile pipe is costly to maintain. 50.00 or more a month from every user should adequately cover that. The service, who the fuck are they to change what comes through on that service. that would be like me being a plumber and deciding what kind of water you can have coming into your house because it’s my pipes it’s coming in on…. and I want you to only have my water at double the rate and half the quality.

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