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Memo from Level 3 — Comcast is Evil

Level 3, who operate one of the Internet backbones, issued a press release today about Comcast, one of their customers. Here is an excerpt:

On November 19, 2010, Comcast informed Level 3 that, for the first time, it will demand a recurring fee from Level 3 to transmit Internet online movies and other content to Comcast’s customers who request such content. By taking this action, Comcast is effectively putting up a toll booth at the borders of its broadband Internet access network, enabling it to unilaterally decide how much to charge for content which competes with its own cable TV and Xfinity delivered content. This action by Comcast threatens the open Internet and is a clear abuse of the dominant control that Comcast exerts in broadband access markets as the nation’s largest cable provider.

On November 22, after being informed by Comcast that its demand for payment was ‘take it or leave it,’ Level 3 agreed to the terms, under protest, in order to ensure customers did not experience any disruptions.

… 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.

So if you’ve been wondering why some of us have been making such a fuss about “Net Neutrality” now you know. Does Comcast really think they can stop the internet from competing with their cable TV business?

UPDATE: More information on this from the NY Times and Bloomberg. Apparently this happened because Level 3 signed a partnership agreement with Netflix to carry their streaming movies.

UPDATE 2: The Wall Street Journal takes the middle ground.

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16 Comments

  1. Falkelord wrote:

    I mentioned this earlier, but COICA is starting to make its way through the senate again. I’m going to hock the frontpage of a file-sharing website I frequent:

    n the United States, a new law proposal called The Combating Online Infringement and Counterfeits Act (COICA) was introduced last week, and there will be a hearing in front of the Judiciary Committee this Thursday.

    If passed, this law will allow the government, under the command of the media companies, to censor the internet as they see fit, like China and Iran do, with the difference that the sites they decide to censor will be completely removed from the internet and not just in the US.

    Please see the following article from the Huffington Post for more information.

    Stop the Internet Blacklist

    And if you are a US citizen, please take the time to sign this petition
    DemandProgress.org – Petition to Stop the Internet Blacklist!

    Update: Also for US citizens, you can email your Senator from the following link and tell him or her your concerns about this bill

    Tell Your Senator: No Website Blacklists, No Internet Censorship!

    Update, from EFF’s website: the Senate Judiciary Committee postponed the scheduled markup of the Internet censorship bill — a fantastic outcome, given that the entertainment industry and their allies in Congress had hoped this bill would be quickly approved before the Senators went home for the October recess. Massive thanks to all who used the EFF Action Center to write to your Senators to oppose this bill.

    Tuesday, November 30, 2010 at 1:38 am | Permalink
  2. Falkelord wrote:

    http://www.huffingtonpost.com/david-segal/stop-the-internet-blackli_b_739836.html

    http://demandprogress.org/blacklist/

    https://secure.eff.org/site/Advocacy?page=UserActionInactive&id=455

    are the links in order, sorry for not including them in the initial post. Even if you don’t agree with P2P and the whole anti-copy protection thing, this has farther reaching consequences than shutting down file sharing websites. Any site deemed unworthy (like the wikileaks site) could be shut down at governmental whim. Just some food for thought :D

    Tuesday, November 30, 2010 at 1:40 am | Permalink
  3. patriotsgt wrote:

    Excellent info Falkelord! I agree we must remain vigilent in preserving our freedoms to include the internet, books, literature and all media sources. There are those in Gov and private sector who would censor access and content as a way of controlling opposition and freedom of thought and expression.

    Tuesday, November 30, 2010 at 6:49 am | Permalink
  4. Jeff wrote:

    Thanks Falkelord! This COICA reminds me of Orwell’s “1984” and the mass censorship turned ignorant patriotism. When we stop standing up to demand free access to all thoughts and opinions is the day we lose it.

    Tuesday, November 30, 2010 at 7:24 am | Permalink
  5. Michael wrote:

    Yes, I second Falkelord’s view that COICA is about more than copyright enforcement. See the DMCA for example. Several groups (e.g., the Church of Scientology) routinely issue DMCA take-down notices (with which the ISPs must comply) to stifle criticism under dubious claims of infringement. Any system set up with the potential for censorship WILL be abused.

    Tuesday, November 30, 2010 at 12:57 pm | Permalink
  6. Jonah wrote:

    And apparently L3 had done what comcast is doing before.

    http://money.cnn.com/2010/11/30/technology/netflix_level3_comcast_traffic/index.htm

    Tuesday, November 30, 2010 at 7:01 pm | Permalink
  7. Iron Knee wrote:

    You know, I’ve seen several articles simultaneously appear like that one Jonah just posted, I think they are BS. They read like a Comcast disinformation campaign. I am not 100% sure (mainly because Level 3 has their own interests in play here too), but the articles defending Comcast don’t make sense. This situation has nothing to do with “peering” agreements. Peering agreements are between internet backbones, and Comcast is not a backbone.

    Level 3 (and Netflix) are not using bandwidth from Comcast. Comcast customers are requesting movies from Netflix. Level 3 just signed an agreement to become the content delivery network (CDN) that distributes Netflix movies. This is not about Level 3 using Comcast bandwidth — Comcast’s customers want to watch those movies and it doesn’t matter if they are supplied to Comcast via Level 3, Akamai, or anyone else. These are movies requested by Comcast customers. If they were not going to be delivered by Level 3, they would be delivered by someone else. Think about it.

    As an analogy, Political Irony is on a server. When you access this blog, my hosting provider server delivers it to some internet backbone (like Level 3), which then transfers it to your ISP (which may be Comcast) who then delivers it to your home (or business). I would be very upset if Comcast told me that I had to pay them money in order for Comcast customers to be able to view my site. I would be even more upset if Comcast has their own site that competed with mine, which their users could access for free.

    In the past, large ISPs (including Comcast) paid lots of money for content, but here Comcast is saying that Netflix (through Level 3) should pay them to deliver content to Comcast’s customers. How does that make sense? We in the US already pay more for slower internet connections than many other countries (and Comcast adds insult to injury with lousy customer service).

    I don’t care if Comcast has been able to get agreements like this from other backbones. It is screwed up. And even if Level 3 is just trying to buck the trend, I hope they win.

    Tuesday, November 30, 2010 at 7:29 pm | Permalink
  8. Jonah wrote:

    IK, I think this is a special case since the content that L3 wants to send is heavy on bandwidth. While netflix may not be directly using comcast bandwidth, it is earning income based on access provided by comcast bandwidth. So the issue here is one way or the other comcast customers are going to have to pay for the increased bandwidth requirement but both comcast and L3 want the other party to charge the customer. While comcast could have an ulterior motive, the bottomline is that whatever network they have may not have been designed to provide each and every customer access to a movie that consumes somewhere between 2 and 3 GB of bandwidth. They can upgrade and either charge the customer directly and then have the customer choose a different ISP if available which means comcast would lose customers or they can have netflix increase its user fee and then the customer would likely stay on with comcast.

    Tuesday, November 30, 2010 at 9:59 pm | Permalink
  9. Iron Knee wrote:

    I don’t think it is a special case at all. When I sign up with Comcast as a customer, I am paying for access to bandwidth, pure and simple. If Comcast wants to put a bandwidth limit on its customers, that is fine. But charging content providers who use lots of bandwidth will damage the internet (and ultimately our economy as well).

    Besides, what does that have to do with Netflix? If a user consumes extra bandwidth, that should be between Comcast and their customer. Are you saying that if a user consumes an equal amount of bandwidth from some other source (like Hulu), it is somehow different?

    And Netflix does not earn income based on how often people watch its movies, it is a subscription-based “all you can eat” service. A better example would be YouTube, which receives advertising revenue each time someone watches a video. It would be fairly easy to play enough YouTube videos (or Vimeo, or some other video source) and use up as much bandwidth as watching a Netflix movie. Where does it stop? Should I have to pay when someone views my blog?

    And finally, I was talking about the sudden appearance of articles that try to make the Level 3 – Comcast dispute look like a business argument over over a peering agreement, which it is not.

    Tuesday, November 30, 2010 at 10:55 pm | Permalink
  10. patriotsgt wrote:

    I to agree with IK on this one. Comcast has bandwidth usage levels in place and customers who exceed their alloted monthly amount (approx 250gb I believe) are charged more, or choked off. If comcast wants to charge 3rd party providers requested by Comcast’s own consumers then that would be like Comcast charging ESPN to show content on their cable television network. It works the opposite, Comcast pays a fee to “use” the ESPN channels, which it in turns builds into the monthly fee it charges consumers for cable TV. Perhaps what L3 should have done was ask it’s Comcast consumers to email or call Comcast to demand their products.

    Wednesday, December 1, 2010 at 7:45 am | Permalink
  11. Michael wrote:

    I’ve been ambivalent about net neutrality for a long time. It looks like the ISPs are trying to double dip. They already charge customers for access to the Internet (i.e., the service providers). Now they are trying to charge service providers for access to the customers. It just seems like pure greed. But there’s more to it than that.

    It’s not just that the ISPs are being greedy. They are simply responding to economic forces. There are two main transfer protocols involved with web browsing: TCP and UDP. When you read a blog, look at pretty pictures, etc., you’re using TCP. When you’re streaming media (e.g., YouTube movies, songs on Pandora), you’re using UDP. It’s very important to understand the difference for one reason: throttling.

    TCP has an inherent throttling mechanism. When the network becomes congested, TCP will drop the connection. That’s why you sometimes get a “Connection timed out” error when accessing a web page. For example, consider when a page gets slashdotted. The server goes down. TCP detects this and gives up.

    UDP, however, has no throttling mechanism. It simply keeps trying, potentially flooding the network with packets that will ultimately expire. UDP, then, is more expensive for the ISPs, because they have to handle more bandwidth. As more and more consumers subscribe to services like Netflix, the ISPs’ operating costs will keep increasing. These costs are externalities for the service providers. That is, the cost to the backbones and ISPs of handling the 1 MB of UDP data is higher than handling 1 MB of TCP data. This is because the intermediate routers (i.e., within the ISP) can drop TCP connections in response to congestion. However, the ISPs cannot drop the UDP packets in the same way because the protocol does not inherently react to congestion.

    To balance their bottom lines, ISPs have two choices: Increase rates they charge consumers or find a new method of revenue. The former is very bad for the ISPs. How many average home users are willing to pay $150/month for access? They could charge differential rates (i.e., a certain amount per GB downloaded), but that’s going to get ugly. They’ll have to develop technologies for monitoring individual rates (that costs money). Also, people prefer flat rates in almost everything. People can tolerate per minute plans for phone service, because that’s easy to measure and understand. People tolerate usage charges for electricity and heating, because those are considered necessary. Internet access does not yet have the same feeling of necessity. But look at cable television. You don’t get charged for the number of channels you actually use. You don’t get charged for the number of minutes you spend watching the boob tube. It’s a flat rate for access.

    So ISPs need to increase revenue in order to cover operating costs, but without actually charging consumers directly. Charging the service providers (indirectly, via the backbone providers, who then can increase rates for the service providers) makes sense, because it forces service providers to pay for what is currently an externality.

    Having said all of that, there’s another problem: Comcast is both an ISP and a service provider. By acting in both capacities, they are leveraging their large ISP subscriber base to protect their services from competition. This conflict of interest just cries out for antitrust investigation. We need net neutrality legislation that recognizes all of these issues. That is, ISPs should be able to charge differential rates to service providers based on the protocol used. However, we need regulation regarding companies that act as both ISPs and service providers.

    As for the question, “Should I have to pay when someone views my blog?” the answer is no. Blogs use TCP and are not causing the problems. Even if you embed a YouTube video, YouTube is the one actually serving up that content, not you. Despite what many net neutrality proponents say, I have seen no behavior to suggest that ISPs have plans to charge different web sites different rates. In my view, a lot of those arguments are FUD and not grounded in the actual economic issues that are causing problems.

    Wednesday, December 1, 2010 at 10:28 am | Permalink
  12. Michael wrote:

    Man, I’ve really got to stop flooding the discussion with these long comments. Ugh.

    Wednesday, December 1, 2010 at 10:29 am | Permalink
  13. Michael, don’t feel guilty! You should have seen a couple of my monster rants from last summer. At least you’re staying on topic. ;-)

    Wednesday, December 1, 2010 at 11:43 am | Permalink
  14. Dan wrote:

    Michael, while I agree that the ISPs are in a bind of sorts, it is unclear to me how your technical analysis elucidates this.

    There is a history of ISPs shooting themselves, the internet, and us in the foot, in the service of short-term gains or savings. For instance, IP has had multicasting (broadcasting the same packet to many computers) in the protocol for decades, yet sites that stream media rarely use this existing feature, because then they can’t as easily gatekeep to get your login details on a case-by-case basis. Instead we need more complicated distributed content delivery infrastructures (e.g. Akamai).

    Similarly, IPv6 has been around since 1998, yet sluggishness on its implementation at the ISP and OS level has meant that we’ve literally lost one of the internet’s design principles — end-to-end connectivity — to the more complicated but shorter-term solution of network address translation (NAT).

    The idea that ISPs should drop IP packets dependent on their wrapping protocol (TCP or just UDP) also breaks the design of the internet. It’s not clear that streaming over UDP is that much worse than doing it over TCP, because eventually the client must implement a throttling mechanism of sorts, even if it isn’t vanilla TCP.

    But this is all beside the point: metering data is easy. ISPs do it anyway. Clearly mobile internet is going toward this kind of graded pricing. Nothing wrong with that in principle. The analogy with cable TV is false, because TV is a broadcast medium, while video on demand is point-to-point.

    Maybe the era of unmetered/unlimited plans (which have been technically a lie anyway) will have to come to an end.

    Wednesday, December 1, 2010 at 5:20 pm | Permalink
  15. Dan wrote:

    PS: YouTube is using TCP as far as I know. Same goes for Netflix/Silverlight. What evidence is there that either uses UDP?

    Wednesday, December 1, 2010 at 5:48 pm | Permalink
  16. Iron Knee wrote:

    This claims that YouTube uses TCP. http://wiki.answers.com/Q/Does_You_tube_use_TCP_or_UDP_protocol_at_transport_layer_Give_reasons

    Wednesday, December 1, 2010 at 6:09 pm | Permalink