Think about it, internet service is analogous to wireless service. It should be we, the consumers, who should have to pay according to our bandwidth consumption, not the up-line providers.

Comcast needs to be reminded that they have large quantities of captive customers (i.e., no other broadband ISP to choose from!!) who are charged the same rate, regardless of whether they casually browse the internet or download reams of movies every night. Why doesn’t Comcast charge its customer according to their usage!? Becasue Comcast is just like Level 3…they only care about “fair” when it affects their bottom line!! When bashing Level 3, I believe George referred to that as being “hypocritical” and somehow even abstracted, perverted, and conveniently morphed that whole concept into being the same thing as “theft”. Clearly George bought too much Comcast stock and is now just pissed because he missed the golden rocket launched by Level 3. Complain about your broker, not about Level 3. Sorry George, your just dead wrong on this whole topic!

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Rushabh Sheth said:
George,

I take exception to the following statement:

“The network that spent all the money up front in capital expenditures provides value to the network that spent little money building the network and it needs to recoup its costs by charging the network that didn’t build the most expensive part of the network.”

The above statement would be true for Comcast and Level 3 IF AND ONLY IF Comcast is NOT already being paid by its end-user subscribers for the bandwidth.

The infrastructure and capital expenditures that were spent to build up the Comcast network is already being paid for by the end-user subscribers. The Comcast subscribers are already paying for the right to receiving the Internet content, including the Netflix content.

If anything, nobody should be paying anybody anything for the peering or content exchange arrangement. Level 3 is getting paid by the content providers like Netflix for the right to use the Level 3 network. Comcast is being paid by end-user subscribers for the right to use the Comcast network. Why should Comcast or Level3 even pay each other anything for anything? Their infrastructure is already paid for by their respective end-users.

This is where the FCC needs to step in. FCC needs to tell Comcast: hey you are already being paid by your own subscribers. No double-dipping allowed. If you don’t think the extra bandwidth from Netflix can be supported by current subscriber fees then just increase the fees or reduce the bandwidth caps. And while we’re at it, we should talk about those local franchise monopolies that you have in place. . . .

Comcast has done little to update its transit links. In my mind Comcast has intentionally congested its transit ports to force their position for higher cost to a direct connection from providers such as Level3. A smart business move, maybe, as long as the likes of Level3 or others fall for this.

Another thing….
Comcast’s own Xfinity brand is in direct competition with Netflix. Xfinity is a CDN customer of Akamai which in turn is COLO’d with Comcast. I find it more than a coincidence that this peering dispute comes shortly after Level3 announced they were selected by Netflix to be the primary CDN. I would venture a guess (only a guess) that Akamai was provided the COLO space in exchange for hosting XFINITY. Since Akamai lost there money maker (Netflix), the need to be providing free CDN service to Comcast may not be as lucrative as before. Understand this is all speculative, but I’ve seen arrangements like this before.

And again I say…..
What Comcast should do is advertise this working partnership with Level3 to provide an enriching experience for Netflix Subscribers and explain the benefits of becoming a Comcast Customer, emphasizing the Netflix Brand.

They ultimately want to build their customer base, especially since growth has been stagnant. Netflix is here to stay, Xfinity or not. Why not use this to build revenue and build their network at the same time. Or better yet, work a deal to have Level3 provide its CDN service in exchange for the required circuits that Level3 needs.

Enough said, going to bed

“Now I am wondering about the transit agreement that Comcast has with Level3. Comcast pays Level3 for this service, can any overflow from the peering agreement get funneled to the transit agreement. I honestly don’t know but I suppose its possible and if thats the case Comcast could be paying Level3 for the influx of traffic into the comcast network”

No, you must not mix transit traffic with peering traffic. They’re separated by the source of traffic coming from Level 3. If it comes from the CDN, it’s peering. Now Level 3 might try to push the traffic from an IP range that’s considered transit, but that would be considered metering fraud as far as their agreement is concerned. Furthermore, if Level 3 tried to bill an additional 100 Gbps of their own CDN traffic as transit to Comcast, and even if their agreement allowed that, Comcast would have even less incentive to improve the performance. At that point, Netflix would likely move back to their original CDN provider Akamai to regain the performance they once had.

If you wish to learn more about this, please see my detailed video on the topic.

Comcast could have told level3 that what you see is what you get, we’ll keep the original peering contract and charge for any additional BW you may require, which from what I’ve read throughout the internet is how its played out so far.

Now, Level3 could say we’ll just stick to our original peering agreement and we will not pay for additional BW. It will be just a matter of time before Comcast customers start getting annoyed that they are having latency/QOS issues while trying to stream Netflix content and give Comcast the boot.

Now I am wondering about the transit agreement that Comcast has with Level3. Comcast pays Level3 for this service, can any overflow from the peering agreement get funneled to the transit agreement. I honestly don’t know but I suppose its possible and if thats the case Comcast could be paying Level3 for the influx of traffic into the comcast network

Comcast could just give Level3 the boot and go with another transit provider and cancel the peering agreement all together. But guess what? Comcast customers are going to still watch Netflix. And Comcast customers are still going to be annoyed by the latency/QOS issues. Comcast will be paying a huge price to its new transit provider because of the bandwidth issue and still having to build up its network to handle traffic.

What Comcast should do is advertise this working partnership with Level3 to provide an enriching experience for Netflix Subscribers and explain the benefits of becoming a Comcast Customer, emphasizing the Netflix Brand.

Just my thoughts

It matters very little whether, prior to this dispute, Comcast was a peer or transit customer of L3. What does matter is the following:

Prior to this dispute, Comcast received a total amount of revenue (most from flat-rate subscriptions for residential Internet access service from eyeballs, but some from transit payments by CDNs such as Akamai) that apparently was adequate to balance out its total costs.

As a result of the deal L3 made with Netflix: (a) Comcast’s revenue from its eyeballs and total traffic to/from its eyeballs would (to a first approximation) remain unchanged; (b) its revenue and traffic from Akamai would decrease; and (c) its traffic from L3 would increase greatly, but its revenue would not. Further, Comcast faced additional costs to serve this increased L3 traffic (e.g. 30 extra ports).

Now in the world of economics, when such a disruption to a prior equilibrium occurs, one generally sees a reaction. In this case, four types of reaction seem possible: (1) Comcast could do nothing — and simply accept lower total revenues and higher costs; (2) Comcast could block the augmented Netflix traffic from L3; (3) Comcast could raise the rates it charges to its eyeballs; or (4) Comcast could request payments from L3.

If you think Comcast should have just sucked it up and chosen #1, you aren’t very familar with business (and this is a business). If you think Comcast should have selected #2, then you aren’t very much a fan of the “no blocking” principle of the FCC’s Internet Policy Statement or network neutrality. While Door #3 is a possible solution, there are many reasons why Comcast may have preferred not to go down that road (e.g., customers who don’t pull a lot of traffic would be encouraged to leave, usage-sensitive billing is expensive and customers don’t like it, etc.) Instead, we know that Comcast choose Door #4 — and what’s even more important, it appears that L3 quickly agreed with this choice. When something like this happens, it is quite likely that economic supply and demand are telling you that this decision was the most rational market choice.

To be sure, L3 would have preferred Comcast choose Door #1 (and it appears to be crying out to Mama FCC to use the force of government regulation to demand that Comcast accept this); but because L3 is a business, too, it recognized that its interests would not be served by Door #2 — because its Netflix packets would never get delivered; or by Door #3, because usage-sensitive eyeball pricing might suppress the demand for its client’s (Netflix’) video services.

This isn’t about personalities and politics. It’s just business and economics — and the Internet is not immune.