Peering problems: digging into the Comcast/Level 3 grudgematch

Is Comcast really trying to wreck the open Internet with a set of new tollbooths? Is Level 3 really trying to browbeat its way to a good deal?

Ever since the Comcast/Level 3 interconnection dispute broke wide open into public view last week, the accusations from both sides have been flying. Sorting out those accusations has been difficult, in part because it was just so hard to know, on a technical level, what exactly has been going on. Peering and transit issues can be notoriously complex but also murky, the details hidden behind nondisclosure agreements.

As the 2009 Annual Report (PDF) from the ATLAS Internet Observatory put it, such deals are "difficult to quantify due to NDA/commercial privacy." One upside of the dispute is that some of this secrecy has been lifted, and both sides have been unusually open with the press and with regulators about how they interact and what they believe to be at stake. If Level 3 is right, Comcast is trying to do nothing less than turn every Tier 1 network in the US into its customer, rather than the other way round. The result: a fundamental shift in network economics, and the beginning of an era in which the major ISPs start throwing their weight around, making it almost impossible for content companies to reach customers without paying each ISP an additional fee for direct network access. In this view, it's no coincidence that the big ISPs like Comcast, Verizon, and AT&T all operate content businesses of their own, including cable TV, video on demand, and IPTV.

If Comcast is right, Level 3 simply got in over its head and offered cut-rate pricing to Netflix in order to deliver the company's streaming video; now it needs to secure an unbelievable deal in order make the number work. More fundamentally, the entire controversy is a reminder that there are no hard-and-fast rules about network interconnection; indeed, the increasingly complex nature of these interconnection deals means that it's not always clear, even to the participants, who should be paying whom.