Comcast, Netflix, Level 3, and what it means for your checkbook
Red Netflix envelopes sit in a bin of mail at the U.S. Post Office sort center March 30, 2010 in San Francisco, Calif.
You've heard of Comcast and Netflix, of course, but you probably aren't as familiar with Level 3. Level 3 is what's called an Internet backbone. So web content (Netflix movies, for instance) leaves a server, travels through Level 3's network, into YOUR service provider (Comcast for instance), and then to you. Think of Level 3 as the freeway and your service provider as the surface streets that lead to your house.
This week, Level 3 complained that Comcast was charging them new fees. It had to do with all the traffic coming from streaming Netflix movies and TV shows that Level 3 was moving through the Internet. Recent estimates are that 20 percent of broadband traffic in the United States is coming from Netflix.
Mike O'Connor has been working in Internet service for years; he's built Internet service providers, consults on this stuff now. He tells us that the way relationships like that between Level 3 and Comcast usually work is called a "peering relationship" where money doesn't really change hands. Level 3 gets their content delivered, Comcast's customers are happy with their access, everyone wins (with customers footing the bill).
But Steve Schultze, associate director at the center for information technology policy at Princeton, says the deal between Level 3 and Comcast was actually a bit different. It had been that several backbones were carrying the Netflix load for a while but then Level 3 started carrying a lot more. This was because they charged Netflix a lot less to carry it. The result was a ton of traffic coming from Level 3 to Comcast and Comcast not being happy about it.
Schultze says no one's going to block Netflix. But the way it's going to ultimately shake out is with you and me paying more for all these movies. It's just a question of whether we'll pay higher Comcast rates, higher Netflix rates, or both. And how much more we'll pay.