Comcast Is Bullying Netflix Partners Into Paying a Toll to Deliver Streaming Video

Level 3 Communications, the networking company that delivers streaming video to Netflix users, says that Comcast is demanding a "recurring fee" for the transmission of such videos to its subscribers. This, it goes without saying, is very shitty news. Updated.

Level 3, who recently signed a deal to become the primary provider for streaming Netflix content, was pressured by Comcast to pay a "recurring fee" "to transmit Internet online movies and other content to Comcast's customers who request such content." After a few days of negotiating, Level 3 paid the fee, ensuring uninterrupted service for Netflix subscribers.

This is presumably the first volley in what will be a long battle between companies like Netflix and broadband providers, nearly all of whom have their own video on demand services to peddle. And this type of thing is precisely the reason that net neutrality—ensuring that internet providers don't discriminate in how they deliver their content—has been and will continue to be such a big deal going forward. When service providers strong arm comparatively little guys like Netflix (and the partners upon whom Netflix relies, like Level 3) into paying higher fees, that turbulence eventually shakes down to the customer, either in the form of higher prices or interrupted service. Big corporate greed ends up screwing John Q. Public—it's nothing new, but it's always frustrating.

Thomas Stortz, Level 3's chief legal officer, said this in a statement earlier today:

Level 3 believes Comcast's current position violates the spirit and letter of the FCC's proposed Internet Policy principles and other regulations and statutes, as well as Comcast's previous public statements about favoring an open Internet. While the network neutrality debate in Washington has focused on what actions a broadband access provider might take to filter, prioritize or manage content requested by its subscribers, Comcast's decision goes well beyond this. With this action, Comcast is preventing competing content from ever being delivered to Comcast's subscribers at all, unless Comcast's unilaterally-determined toll is paid - even though Comcast's subscribers requested the content. With this action, Comcast demonstrates the risk of a ‘closed' Internet, where a retail broadband Internet access provider decides whether and how their subscribers interact with content.

Update: Comcast claims that their "toll" has nothing to do with Netflix or video traffic in general but rather with the amount of traffic Level 3 is pushing off onto Comcast's intertubes. In a statement tonight the company said:

We are happy to maintain a balanced, no-cost traffic exchange with Level 3. However, when one provider exploits this type of relationship by pushing the burden of massive traffic growth onto the other provider and its customers, we believe this is not fair.

Indeed, recent reports suggest that Netflix is responsible for a fairly absurd amount of bandwidth, and as Wired points out, the contracts that dictate who is responsible for carrying what traffic are largely left undisclosed to the public. Comcast's statements (unsurprisingly) shift the debate from one of net neutrality to the esoteric and largely uninteresting business of service providers negotiations.

Regardless, Level 3 says they'll be taking the matter to government regulators soon—hopefully there will be sufficient outrage at some point in the process to get Comcast to back down. And maybe this will give the people at the FCC some pause before allowing the pending Comcast/NBC Universal mega-merger to actually go through. [NYT]

Image credit Ross Catrow