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Netflix streaming causing bandwidth price dispute

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TEXT OF STORY

Kai Ryssdal: Somewhere on the list of important companies a lot of people have never heard of, you'll find a firm called Level 3 Communications. It runs a $20 billion set of Internet pipes that helps companies like Netflix stream their content all over the world. To get to customers, that data has to go through Internet service providers and one of the big ISPs, Comcast, has told Level 3 the price tag for the high-volume video content from Netflix is going to be going up.

Marketplace's Steve Henn reports.


Steve Henn: A recent study found that 20 percent of all the bandwidth used up on the Internet during after-dinner hours is devoted to streaming Netflix movies. Just think about that. And Netflix is just getting started with online streaming.

All this new traffic means companies like Comcast -- which connect consumers to the net -- are having to spend a lot of money to build out their networks to keep up. And this is why Comcast says it raised the fees it charges Level 3.

Michael McGuire: They have a point.

Michael McGuire is a media analyst at Gartner.

McGuire: If consumers want to use more bandwidth to enjoy more content services, there is probably a fair charge they should be paying.

And if Level 3 and Netflix need to use Comcast's network to reach their customers, they should pay more too. Or at least that's Comcast's side of the story.

But John Ryan from Level 3 doesn't trust Comcast to be an honest broker. He believes Comcast sees Netflix as a threat and would love to crush the company.

John Ryan: For consumers what's at stake is preservation and protection of openness and innovation within the Internet.

Ryan says if Comcast is free to start charging higher prices to its direct competitors, it could gain a big, unfair advantage for its cable business. And Washington is watching. The Federal Communications Commission's widely expected to wade into these issues next month.

In Silicon Valley, I'm Steve Henn for Marketplace.

About the author

Steve Henn was Marketplace’s technology and innovation reporter for the entire portfolio of Marketplace programs until December 2011.

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