Level 3

Internet backbone provider Level 3 claims that five US consumer broadband providers are refusing to upgrade their peering connections for the past year in a move that is causing consumers to get sub par Internet access.

In a blog post Monday, Level 3 accused five US Internet service providers and one European ISP, which it declined to name, of using their market power to attempt to extract service delivery fees from companies such as Level 3.

The dispute Level 3 has with these six broadband providers is part of an ongoing debate over so-called network peering arrangements. Companies like Level 3, Cogent Communications, and Netflix, which have brought the issue out in public, argue that more government oversight is needed to ensure big broadband companies are not abusing their power. Meanwhile, broadband providers say these disputes are part of an established way of doing business on the Internet.

The reality of what's happening and how it should be addressed to ensure that consumers get the best quality Internet service is likely not so cut and dry.

What is peering?

Network peering is a concept that has been around since the Internet began. It allows Internet network operators to exchange traffic with each other in order to deliver IP packets throughout the world even in places where a specific network operator doesn't have a network.

In many cases, no money is exchanged between the providers swapping traffic because the balance of traffic from one operator to the other is generally equal. But in instances where the balance of traffic is not equal, commercial arrangements are struck.

In the past couple of years, a few companies involved in these arrangements have gone public with claims that broadband providers are unfairly extracting fees for what should be considered basic peering relationships. Streaming video provider Netflix has made the most noise lately, calling on the Federal Communications Commission to intervene and adopt "strong" Net neutrality regulations to include such arrangements.

Backbone providers Level 3 and Cogent also have taken disputes with individual broadband providers public. Cogent has accused Verizon of deliberately not upgrading its peering connections, because Cogent has refused to pay for upgrades. And Level 3 and Comcast were in an ongoing dispute for nearly three years over the same issue. Since initiating these public fights, the companies also have lobbied the FCC to get involved in these disputes.

Level 3's argument

In its blog post Monday, Level 3 said that six broadband providers are deliberately degrading network traffic in an effort to force the company to pay for interconnection.

"They are deliberately harming the service they deliver to their paying customers," Mark Taylor, vice president of Content and Media at Level 3, said in the blog post. "They are not allowing us to fulfill the requests their customers make for content."

Level 3 explained in the blog post that it has interconnection arrangements with 51 providers throughout the world, but has only seen persistent congestion on 12 of those connections. It is currently working with six providers to get enough capacity to alleviate the issue. But it said the other six providers, which Level 3 claims are broadband providers which have near monopolies in their markets, have refused to upgrade their networks. And this they claim is what is causing issues for customers.

The company said that most network interconnections operate at around 36 percent capacity, which allows for an easy flow of traffic between the networks. But on the six networks it claims are problematic, it said congestion has been around 90 percent for more than a year. At this level of congestion, the connection is saturated and packets are dropped often for several hours a day.

"Shouldn't a broadband consumer network with near monopoly control over their customers be expected, if not obligated, to deliver a better experience than this?" Taylor asked.

The other side to the network congestion story

While Level 3 paints an ugly picture of a handful of broadband providers in the US, there may be another side to this story, which might explain the congestion that Level 3 sees on its network.

Broadband providers, which have been in disputes with Level 3, Cogent, and Netflix in the past, say that these conflicts are nothing more than business spats. In a public argument Level 3 had over this very issue with Comcast in 2010, Comcast filed a letter with the FCC explaining its point of view.

Comcast explained in its 2010 letter that many services on the Internet pay so-called content delivery providers, or CDNs, for Internet "transit," which means they pay companies like Akamai Technologies or Limelight, which only provide CDN services, to deliver their content and services to broadband customers. The business of delivering content to broadband customers is a highly competitive market, and the cost of delivering this service has fallen drastically over the past decade.

As a result, Internet backbone providers also have gotten into the business of delivering content by directly connecting Internet content providers, such as Netflix or Amazon, directly to broadband providers. In other words, these companies, which also own big Internet backbones, are cutting out the CDN providers by connecting directly to local broadband networks.

In fact, Comcast argued in its letter that its dispute with Level 3 only came about when Level 3 began ramping up its own CDN business and delivering video traffic for Netflix, which is believed to generate at least 30 percent of all Internet traffic. Cogent, which like Level 3 is a backbone provider that has gotten into the CDN business, also had a big deal with Netflix and has been in an open tussle with Verizon over similar issues. Last year, Netflix began interconnecting directly with broadband providers and has since gone public with its own disputes with broadband providers such as Comcast.

Because Level 3 and Cogent already have peering relationships with broadband providers, these companies have argued that even when traffic increases on their networks from their deals to deliver Netflix traffic they should still have the same settlement-free peering relationship with the broadband providers as they had previously. Netflix, which doesn't have a history of peering relationships with broadband providers, also has argued that even though it is delivering more traffic onto a broadband provider's network than is coming the other way, it too should have a settlement-free peering relationship with broadband providers instead of paying a similar rate to what a CDN, like Akamai, would pay to deliver its traffic to broadband customers.

But broadband providers say this is not a fair arrangement. In its letter to the FCC in November 2010, Comcast described the situation it faced with Level 3 at the time:

"Until Level 3 fomented this dispute, Comcast and Level 3 exchanged Internet traffic as part of a commercial interconnection agreement, under which Comcast paid Level 3 for interconnection facilities. Although the parties exchanged traffic at a ratio of about 2:1, with Comcast terminating more of Level 3's traffic, this was well within the industry's established bounds for "roughly balanced" traffic, and they exchanged their on-net traffic on a settlement-free basis.

"Now, Level 3 has decided to reinvent itself as a major CDN, in competition with other commercial CDN players, all of whom pay for transmission of their traffic on Comcast's and others' networks. And in so doing, Level 3 would more than double the amount of traffic it sends to Comcast -- which would result in a traffic imbalance that could be in the range of about 5:1. The parties' current interconnection facilities could not begin to support that type of traffic flow."

Comcast said in its letter that it tried to work out a solution with Level 3, which required the company to pay a fee for the necessary network upgrade to handle the additional traffic. But initially Level 3 refused, arguing as it does in the current blog post, that its established network peering arrangements should suffice.

Comcast and Level 3 were in a public dispute over these arrangements for nearly three years. In July 2013, the companies issued a press release stating they had settled their dispute. Details were not made public.

Pot calling the kettle black?

What's ironic given Level 3's accusation against Comcast and the current argument it is using against the six unnamed broadband providers it calls out in its blog post is that the company took the opposite stance in a stand-off with Cogent in a peering dispute several years ago. In 2005, Level 3 threatened to terminate its peering relationship with Cogent because Cogent was sending too much traffic to Level 3 and refused to pay for it.

"Over the last six months, our operating subsidiary has assessed all of our relationships to determine whether or not settlement-free peering is still appropriate," Level 3 said in a press release. "We determined that the agreement that we had with Cogent was not equitable to Level 3."

The companies ended up settling the disagreement a couple of weeks later. Details of the arrangement were not made public.

It is interesting that these companies continue to make these arguments and ask for the FCC's involvement when the issues they say they are facing with broadband providers are the same types of disputes that large Internet companies have had with each other for years.

So far, the FCC has kept out of these fights. And it doesn't appear that current Chairman Tom Wheeler is interested in lumping peering arrangements into his current proposal to reinstate Net neutrality rules.

Still, some consumer advocates have called on the FCC to at least gather more information about these arrangements to see if broadband companies are exerting market power in a way that disrupts the operation of the Internet. At this point, it's unclear whether the current FCC will take up this issue.

In the meantime, it seems that Level 3, Cogent, and Netflix are likely to continue making the same public arguments and accusations in an effort to garner more favorable terms with each other and with broadband providers. Netflix has already acquiesced and entered into deals with both Comcast and Verizon. And it's talking with other big broadband providers like AT&T. Again, details of the deals have not been made public.