Level 3’s Appeal for Government Intervention Is Unwarranted
The blogosphere has been buzzing since last night, with all manner of “experts” offering opinions about the dispute between Comcast and Level 3 over their commercial arrangement for the exchange of Internet traffic. While I am a bit hesitant to add to the ruckus, I think it is important to refute the misguided notion that this business dispute is really a “net neutrality” problem that can and should be solved by federal regulation.
We all have heard the Internet described as a “network of networks” but we generally give little thought to the remarkable logistics involved. For the Internet to operate, thousands of networks – small and large, wireless and wireline, urban and rural, domestic and global – must establish arrangements to govern how they interconnect and exchange traffic. While there are different types of providers (backbone, content delivery network (CDN), etc.) and different types of arrangements (settlement-free peering, paid transit) – see this White Paper for a good explanation – the key point is that these myriad of arrangements have developed over time, in the marketplace, without any legislative or regulatory intervention. That the Internet works at all is amazing; that it works 24/7 to bring consumers content from around the world at lightning speed borders on the miraculous.
The FCC consistently has taken a “hands off” approach to these arrangements. It has not imposed any form of regulation on these arrangements, nor has it intervened in the periodic disputes that occur between backbone providers, like Level 3’s dispute with Cogent in 2005 – in which Level 3 insisted that Cogent pay a fee for transmitting content on Level 3’s network rather than peering on a settlement-free basis. Moreover, while the FCC has been considering net neutrality regulations for some time, it has never suggested that it was considering any change in the regulatory treatment of backbone and CDN providers. (Indeed, even the most fervent net neutrality advocates, like Free Press, have recognized the legitimacy of these commercial arrangements; see note 8 on pg. 17 in these comments).
So is there anything unusual about the dispute between Comcast and Level 3 that should cause the Commission to reassess its hands off approach to these types of arrangements? No. While some of the initial commentary, reacting solely to Level 3’s press statement, reflected a knee-jerk reaction that any dispute involving the Internet implicates net neutrality; as the day wore on, cooler heads seem to be prevailing, with most observers, including some net neutrality advocates, recognizing that this was nothing more than one party to a commercial negotiation trying to use the regulatory process to gain negotiating leverage (Also see this article from Multichannel News).
Nor can Level 3 credibly claim to be surprised by Comcast’s approach. Comcast’s policy on settlement-free peering – including its expectation that any peering partner “maintain a traffic scale between its network and Comcast that enables a general balance of inbound versus outbound traffic” – is posted right on its website. When Level 3 approached Comcast and asked for a significant change in the parties’ physical interconnection arrangement, it should have fully expected that Comcast would seek a corresponding change in the parties’ business arrangement, consistent with the general practice across the industry.
Under the circumstances, Level 3’s plea for government intervention in this commercial negotiation is entirely unwarranted.