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December 1, 2010 / Matt Gerardi

Comcast Clashes With Netflix Partner, Adds Even More Heat to the Net Neutrality Debate

It has been reported that Level 3 Communications, a communications and information services company that is a key partner in the running of Netflix’s streaming video service, has accused Comcast of charging fees that would put online streaming services at a competitive disadvantage.  Level 3 calls the fees a tollbooth that “threatens the open Internet.” (New York Times)

On November 19 Comcast began charging Level 3 a fee to “transmit Internet online movies and other content to Comcast’s customers who request such content.” This came only a week after Level 3 announced a multiyear partnership with Netflix.

Netflix represents a major competitor for Comcast in the entertainment and streaming video market. Comcast is poised to takeover NBC Universal and a major stake in Hulu. Both Hulu and Netflix stream NBC Universal content, but if the Comcast/NBCU merger is approved, Comcast would be in a position to receive a big chunk of the Hulu profits and likely remove content from Netflix’s service.

Another reason why Netflix could be a potential target for Comcast’s wrath is the simple fact that their streaming service represents another outlet for customers looking to cancel their cable subscriptions. A great deal of talk has been made recently about streaming services and Internet enabled televisions as a means of weening Americans off of cable and Netflix represents a major player in that movement.

Just today Netflix signed a deal with the newly formed film distribution company FilmDistrict, which will see the company’s films receive Netflix streaming treatment instead of coming to traditional cable movie channels such as HBO and Showtime. (Slashfilm)

This whole dispute between Level 3 and Comcast feeds into the net neutrality debate. Level 3’s argument is that by charging them, essentially a competitor to Comcast, extra fees to facilitate the delivery of their streaming video, Comcast has used its power as an ISP to limit the competitive ability of Level 3 and ultimately violated net neutrality.

Comcast and some analysts see this as a simple commercial dispute. According to a recent study, at peak hours Netflix’s streaming service can account for up to 20 percent of all download traffic across America. That is a massive number and some see Comcast as well within its reach to demand some extra fees from a company that is using their service as an intermediary to send content to millions of users. (New York Times; Tested)

Some tech writers would even argue that Level 3 is using Comcast’s miserable public reputation as a way to leverage the company for lower service fees. By portraying Comcast as a villain that wants to take away people’s Netflix streaming — it should be noted that Netflix offers a streaming only account which costs $7.99 per month and would be rendered useless if Comcast completely throttles Netflix’s streaming service on its network — Level 3 is able to leverage the outcry of public support it receives and force Comcast to lowball a service fee for the massive enterprise that is Netflix’s streaming delivery service. (@WillSmith)

Level 3 has made it clear that they will be reaching out to the FCC which, it is believed, is gearing up for a vote on possible net neutrality regulations. Thomas Stortz, Level 3’s chief legal officer, said the company will be, “asking them to take quick action to ensure that a fair, open and innovative Internet does not become a closed network controlled by a few institutions with dominant market power that have the means, motive and opportunity to economically discriminate between favored and disfavored content.” (New York Times)

The FCC’s next meeting will take place on December 21.

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