Understanding the Level 3-Comcast spat (FAQ)

Internet backbone provider Level 3 says that cable giant Comcast is threatening the openness of the Internet and Comcast is accusing Level 3 of trying to get a free ride on its network.

Which one is right?

Accusations between the two companies have been flying since the end of the day Monday. Level 3 has accused Comcast of violating Net neutrality principles by insisting that Level 3 pay for sending more traffic over Comcast's network. Level 3 has recently won a contract to deliver video services for Netflix, which is the largest single producer of Internet traffic on the Web in North America.

Comcast argues that Level 3 is trying to use its free peering relationship with Comcast to add twice as much traffic onto Comcast's network without paying for it. Meanwhile, Level 3's content delivery network competitors are forced to pay for the same access Level 3 wants to get for free.

Much of the dispute is focused on business relationships, largely hidden from the average consumer. To help people better understand what's going on, CNET has put together this FAQ.

What is a content delivery network?
A content delivery network or content distribution network (CDN) is a system of servers that is placed throughout the Internet to bring content and data closer to end users. By storing data closer to consumers, Web pages can load faster and streaming movies can be transferred faster than if the data was stored in a central location.

The problem CDNs solve is that they maximize the speed at which content can be delivered into people's homes. CDNs also cut down on the amount of traffic that must travel across Internet backbone networks. This reduces bandwidth costs and saves money while also creating a better experience for end users.

CDN providers, such as Akamai, Limelight, and Amazon CloudFront, have created businesses that send significantly more traffic over another carrier's infrastructure than they receive on their own network. For that reason, they typically purchase services from Internet backbone providers. A source close to Comcast confirmed that Comcast had a commercial arrangement with Akamai to deliver all of its services to Comcast customers, including the Netflix content.

Comcast said in its statement that the dispute with Level 3 is over a peering relationship. What does that mean?
Comcast and Level 3 are services providers who each own their own infrastructure. Comcast is one of the largest broadband providers in the U.S. It connects thousands of homes and businesses directly to the Internet via its local and regional network.

Level 3 is what is called a backbone Internet provider. Traffic from regional and local networks, such as Comcast's broadband network, are aggregated at various points and then connected to Level 3's network. Think of it like the road system in the U.S. Level 3 is a big interstate highway that carries data long distances. At some point, the traffic must leave the interstate highway and get on state and local highways to reach its final destination.

Carriers charge for access to their networks. But if two service providers each own infrastructure, they can create a peering arrangement. If they each carry roughly the same amount of traffic from the other carrier on their network, they can simply swap the traffic for free.

Does money ever get exchanged for these transactions or do they swap the traffic for free?
It depends on the terms of the deal and the nature of the relationship. Networks may charge a fee for using their network, but if each provider is sending equal amounts of traffic onto another carrier's network, then they may simply swap traffic without money changing hands at all.

But when one network sends more traffic to another network, the sender usually pays a metered fee for the traffic it has sent. This makes sense because when more traffic is sent to a network, that network operator must upgrade its network to handle the additional traffic.

Is this the type of relationship that Level 3 and Comcast have had?
Yes, Comcast said in a letter to the FCC today that the amount of traffic the companies sent to each other was roughly equal. Comcast said that Level 3 typically send more traffic to Comcast than Comcast sent to Level 3, but under traditional peering arrangements this was considered roughly equal. And it made sense, since most consumers download more content and media over their broadband connections than they upload.

So is Level 3 a backbone provider or a CDN provider?
The answer is that it's both. Level 3 is one of the largest Internet backbone providers in the world, but it also runs a content delivery network business. Because it owns its own nationwide backbone network, it has an advantage over its competitors, such as Akamai, which do not own any network infrastructure. The big advantage is that Level 3 doesn't have to pay to access its own nationwide backbone that carries traffic to regional networks, such as Comcast's network. But Level 3 does not own the local and regional broadband networks.

Is this where the dispute with Comcast comes into play?
Yes, it is. This is the heart of the disagreement. In that letter Comcast sent to the FCC today, it said that under its former agreement, Comcast and Level 3 exchanged all on-network Internet traffic for free. But Comcast actually paid Level 3 to interconnect its network. Even though the parties exchanged traffic on a 2:1 basis in which Comcast actually terminated twice as much traffic from Level 3 as the company carried from Comcast, the companies considered it an even swap.

Comcast said in its statement yesterday that Level 3's deal with Netflix will double the amount of traffic that Level 3 will send to Comcast's network. The ratio of traffic will soon be 5:1, in which Netflix sends a greater amount of traffic over Comcast's network than Comcast sends over Level 3's network.

What's more, Comcast had been charging Akamai, which previously delivered Netflix's video content. Now that Level 3 has won that business, Comcast is not collecting that fee from Akamai. As such, Comcast argues that it must charge Level 3 the fee to deliver the traffic.

So Level 3 doesn't want to pay Comcast to deliver its traffic even though its competitor, Akamai, was charged for delivering the Netflix content?
That is correct. Level 3 likely won the deal with Netflix because it was able to undercut its competition in terms of pricing. And it feels that since it is a network peering partner with Comcast that it should not have to alter its agreement, even though it is adding a new CDN customer that will consume a lot more bandwidth than other customers using its CDN network.

What does all of this have to do with Net neutrality?
Level 3 claims that Comcast is singling out the Netflix video traffic and attempting to charge a fee for delivering a specific type of traffic to customers on its network. The company argues that it has no other option but to agree to this fee if it wants to deliver Netflix video to customers in Comcast's territory. And so Level 3 claims this is a violation of the Net neutrality principles that the FCC has already established and is currently working to make official regulation. These principles state that network operators should not slow or degrade Web traffic from a competitor in an effort to make its own service more appealing to consumers. Net neutrality supporters have also been pushing the FCC to adopt provisions that would prohibit network operators from charging companies higher fees to deliver high bandwidth content at a higher quality.

What do you think? Is Comcast violating Net neutrality principles or is this merely a peering dispute?
My gut tells me this is more of a peering dispute than a true violation of Net neutrality. And there are several reasons why I think this.

For one, Comcast isn't stupid. I doubt very much Comcast would risk rattling the FCC's cage as it puts the finishing touches on new Net neutrality regulations or as it deliberates over conditions on Comcast's merger with NBC Universal, both of which are happening right now.

Second, Comcast has said that it doesn't care if Level 3 is delivering video from Netflix or high-capacity files from NASA, the fact that Level 3 will be more than doubling the amount of traffic it dumps onto Comcast's network is the problem. Comcast summed it up this way, again in today's letter to the FCC:

"Level 3 is trying to game the process of peering--one that has worked well and consensually, without government interference, for over a decade--in order to gain a unique and unfair advantage for its own expanding CDN service. Level 3's problem apparently arises out of the fact that it recently won a bid to become one of Netflix's primary CDN providers--in competition with the major national CDNs that already send Netflix and other traffic to Comcast's network. In order to undercut its CDN competitors, Level 3 wants to avoid the commercial arrangements other CDN companies use to terminate traffic onto Comcast's and other providers' networks, and instead force Comcast to accept its CDN traffic for free, under a 'peering' relationship. This is not how peering works, here or anywhere in the world. 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."

Lastly, I find Level 3's assertions somewhat hypocritical. In a press release issued five years ago when Level 3 was in a peering dispute with Cogent, it argued, as Comcast has, for fair and balanced free peering. In that statement, Sureel Choksi, executive vice president of Level 3, said "In order for free peering to be fair to both parties, the cost and benefit that parties contribute and receive should be roughly the same."

Level 3 said that there were a number of factors that determined whether a peering relationship is mutually beneficial. And it determined that the arrangement with Cogent was not fair because it sent far more traffic over Level 3's network than Level 3 sent over Cogent's network.

"It is important to keep in mind that traffic received by Level 3 in a peering relationship must be moved across Level 3's network at considerable expense. Simply put, this means that, without paying, Cogent was using far more of Level 3's network, far more of the time, than the reverse. Following our review, we decided that it was unfair for us to be subsidizing Cogent's business."

It sounds to me like Level 3 is asking Comcast to do something it has refused to do for its peering partners.

So what happens next? Will Comcast customers not be able to watch Netflix movies?
No, Comcast is not blocking Netflix. And it has no intention of blocking Netflix.

"Any rumors about blocking Netflix are false," a Comcast spokeswoman said in an e-mail. "Our customers can and do watch video from any online video provider, including Netflix and dozens of others, on our high-speed Internet service."

FCC Chairman Julius Genachowski said during a press conference today that he will look into Level 3's claims. As I mentioned before, Comcast has already written a letter to the FCC explaining its position. Level 3 has not lodged any formal complaint at the FCC.

Smaller peering disputes are usually settled in court. And the two parties in dispute usually cut off access to each other. But that's unlikely to happen in this case. Level 3 and Comcast are too dependent on each other for sending massive amounts of Internet traffic for their customers. It would make them both look bad if they refused to provide service to each other. It's more likely the companies will settle their dispute between now and January when the bulk of Netflix's traffic is transferred to the Level 3 network.