Comcast would like more money from Netflix/Level3

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So, it didn’t take that long until providers started to demand more money for streaming content. Right now that little kerfluffle is between Comcast and Level 3, which is now handling a large chunk of Netflix’s online movie streaming traffic.
Comcast would like Level 3 to pay it money, please. And if Level 3 didn’t want to pay, then streaming would have a very bad day. So they payed, and now complaining loudly about the anti-competitive treatment.

Of course Comcast now says that it’s irrelevant that Level 3 just happens to provide Comcast’s clients with alternative to a cable subscription. Just that there’s a big disbalance in amount of traffic that goes from Level 3 to Comcast.

And it’s true, for quite a while ISPs were happy to have reciprocal agreements, where neither would pay the other as long as traffic is approximately the same. However, as Netflix pushes towards streaming-only and consumes up to a quarter of all bandwidth now, traffic flow is no longer equal. Torrent from Level 3 to Comcast, tiny trickle from Comcast to Level 3.

A funny fact is that as long as Comcast continues to serve more residential customers than businesses, this disbalance will continue to grow. Because most cable internet plans are severely asymmetrical. What used to be almost symmetrical connection in dialup times now turned into 5-10-15 Mbps download speed coupled with 2 Mbps upload speed at most. ISPs themselves were advocating this, as “users mostly consume content” (except for file swapping services which are generally illegal, thus squeezing the opportunity to upload illegal content is another advantage for ISPs). So, how exactly can Comcast residential customers produce enough upload bandwidth? They can’t.

So, while Comcast coyly speaks the truth, it’s more of a game of chicken. They demanded to be paid twice (customers already pay for the connection, and that side of cable industry is extremely profitable, with expenses falling and profits rising year to year) and they got it, at least for now. Level 3 and Netflix lost the game of chicken and didn’t announce that Comcast’s cable internet subscribers would be charged extra because their beloved ISP extorts money from Level 3.

Theoretically Level 3 could try to place some of its servers into Comcast’s data-centers, and try to compensate outgoing bandwidth, but I bet the price is prohibitive. Why would Comcast want to fix a situation that gives them an advantage?

The last hope will be regulators, but I don’t hold my breath. Despite what FCC claims, there’s almost no competition in case of duopoly — you either go with cable or your unfriendly local telco (save for lucky ons with FIOS). Prices are about the same, but technical limitations of DSL mean that you have to choose between a bad deal (caps, high price) and worse deal (same price, lower speeds). No matter who wins, customers loose.

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