After Level 3 (LVLT) inked the deal, it went to Comcast and asked permission to send twice the amount of traffic to the cable and Internet provider's network as it had done before. The data spike isn't surprising: Netflix represents more than 20% of download traffic during peak hours, according to a new study by Sandvine.
Comcast (CMCSA, Fortune 500) scoffed. That's a whole lot of bandwidth that Level 3 is asking for, and it's expensive for Comcast to constantly beef up its network to support additional traffic.
Typically, content delivery networks (CDNs) like Level 3 have what's called "peering" agreements with Internet service providers (ISPs) like Comcast. The two sides figure that a roughly equal amount of traffic will be driven to each of their networks, so neither charges the other a fee for use.
But Comcast says that with the new Netflix load, Level 3's traffic to Comcast's network would be five times more than the cable company is driving to Level 3's network. So Comcast demanded that Level 3 pay for that traffic increase.
"Level 3 wants to compete with other CDNs, but pass all the costs of that business onto Comcast and Comcast's customers, instead of Level 3 and its customers," Comcast said in a blog post.
In response, Level 3 lashed out at Comcast. It called the new fee unfair and accused Comcast of abusing its "dominant" position as the nation's largest cable provider."By taking this action, Comcast is effectively putting up a toll booth at the borders of its broadband Internet access network," Level 3 said in a press release.
Still, it says it grudgingly agreed last week to pay up. "After being informed by Comcast that its demand for payment was 'take it or leave it,' Level 3 agreed to the terms, under protest, in order to ensure customers did not experience any disruptions," the company said.