Level 3's inflammatory Monday afternoon press release, in which it basically accused Comcast of trying to whack Netflix streaming traffic and flout net neutrality principles, certainly started a fire. Within hours of issuing the press release, the head of the FCC's Wireline Competition Bureau was on the phone with Comcast, giving the company the business end of her Question Stick. What exactly was going on here, she wanted to know.

So Comcast told her, and in a follow-up letter (PDF), made its answers public for the world to read. That's because, in Comcast's view, the entire dispute is “nothing but good old-fashioned commercial peering dispute" and Level 3 is being "entirely disingenuous."

The entire blowup was extraordinary, because Level 3 has been in commercial arrangements with Comcast for years. It apparently decided to risk whatever goodwill it had built up on its attempt to drive a hard bargain that would put Level 3 in a better position than content delivery network competitors like Akamai and Limelight.

A rash bid



Why take the risk? In Comcast's view, Level 3 may be in over its head with its new agreement to deliver all of the Netflix streaming video traffic. The argument is that Level 3 won the Netflix contract away from other CDN providers by providing a surprisingly low bid, one that it now has to back up with a good deal from the major US Internet providers.

“Level 3 has low-balled its way into a new business deal that will significantly increase the amount of Level 3's traffic Comcast would carry,” says the cable giant, “and suddenly wants to seriously disrupt settled economics of Internet traffic to meet its new business plan. Its position is not based on any principles of fair play on the Internet, but instead is merely the result of its rash bid to carry Netflix traffic at radically low rates, based on the flawed assumption that it could use its Tier 1 Internet backbone status to cram its CDN traffic onto others' networks on a settlement-free basis.”

Indeed, because Level 3 is such a major Internet backbone provider and has historically run only a smallish CDN operation, Comcast has actually been the one paying Level 3 for certain interconnections in the past.

But the Netflix deal alone is so massive that Level 3 has suddenly become a major CDN player. Comcast says that it was approached by Level 3 two weeks ago, just after Level 3 signed the Netflix deal, and was asked for 27 to 30 new interconnection ports using the two companies' existing interconnection agreement (that is, Level 3 would pay nothing more for adding up to 30 direct 10GigE connections to Comcast's network).

Comcast “was able to scramble and provide Level 3 with six ports (at no charge) that were, by chance, available and not budgeted and forecasted for Comcast's wholesale commercial customers.” After providing these six additional ports, Comcast concluded that the existing settlement-free peering agreement with Level 3 was still (barely) valid, but if Level 3 really wanted another 21 to 24 ports, this was simply too much traffic. Level 3 would have to pay for those ports like any commercial paid peering customer.

Comcast also notes that nothing about any of these new ports was contingent on the type of traffic coming across it. That is, the company was concerned only about traffic volumes, not content.

Comcast's peering and transit policies are available on the company's website, and those policies make clear that settlement-free peering is only available to a company that can “maintain a traffic scale between its network and Comcast that enables a general balance of inbound versus outbound traffic.”

Level 3 did not respond to our inquiries.