The Wall Street Journal and others are reporting that FCC Chairman Genachowski is siding with Comcast in its dispute with Level 3 over all that Netflix traffic. He is quoted as saying that his agency's new net neutrality rules don't "change anything with existing peering arrangements" and that the dispute is a 'private business dispute'. But I'm always a bit leery of quotes that don't actually consist of full sentences, and Level 3 of course disputes this interpretation. Level 3 SVP Robert Yates says:
In fact, Chairman Genachowski took great pains to avoid such an implication, correctly stating that the Comcast/Level 3 dispute is not yet before the FCC and that the FCC has gathered no facts about it. To the contrary, Level 3 was encouraged by Chairman Genachowski’s observation that the Open Internet Order applies to Internet service to consumers and small businesses, the very service that Comcast is using to extract a fee from content owners and their carriers as a condition to delivering the content that Comcast’s subscribers request.
I'm still trying to find a more complete transcript, or a video clip of the relevant portion for an unfiltered view. Honestly, though, does it really matter at this point what a powerless FCC says in front of a gridlocked Congress? At the end of the day, the FCC simply doesn't have the mojo to embrace an expanded scope for its already-under-fire net neutrality rules. And even if it wanted to, the lobbying muscle of a combined Comcast/NCTA/AT&T/Verizon effort seems perfectly capable of holding the balance.
So I'm expecting this whole thing to devolve. By that I mean that sooner or later it will come to a head and the internet will find itself partitioned. I have no idea whether this particular disagreement will escalate that far but if they decide not to knuckle under, Level 3 will probably simply rescind its agreement to Comcast's payment terms and make Comcast either cut them off entirely or take away the extra ports and degrade service. Comcast will probably choose the first option, at which time those of its subscribers that use Netflix are going to be royally pissed off and might give FIOS a try or something. But Netflix itself might also be rather upset with the situation, and could move its traffic to another CDN. The questions will be who does the disconnecting, whose customers are the most pissed off, and who has the higher public pain threshold.
However, I think Netflix also knows what is at stake. If Comcast can dictate prices to a Tier 1 backbone, they can also raise prices on all CDNs who wish to peer with them, and hence can directly affect pricing on all routes Netflix has to its customers. So can AT&T and Verizon, which is why they have been publicly supporting their sworn enemy in this fight. Such is the power of the last mile. I said long ago that network neutrality at the consumer end would cause last mile providers to simply migrate the toll booth up the chain and into the peering market. The pound of flesh will be taken from someone, eventually.
It may be, however, that there is simply nothing to be done about it until someone abuses their position. Comcast's current demands on Level 3 don't actually rise to that level, they simply change the game such that someone else could. Eventually some last mile provider will do so, and then Special Access Peering here we come. Be careful what you wish for...
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