Peering Dispute Between Comcast and Level 3 is Not Unusual

Despite the colorful nature of the Level 3 Communications dispute with Comcast over interconnection arrangements, the dispute is a rather typical commercial dispute between interconnection partners.

In the past, when traffic exchanged between the Comcast network and Level 3 was roughly equal, it made sense to peer the networks on a "settlement-free" basis. Now that traffic flows are about to become quite unbalanced, that won't work.

With the massive new Netflix CDN deal where Netflix is currently the largest source of traffic in North America, Level 3 will likely start sending five times more traffic to Comcast than it receives.

When that happens, a "settlement-free" peering arrangement often becomes a "for-fee" transit agreement, where the network imposing an unequal traffic load pays the other network.

That's the situation here, where a business relationship that worked well when traffic exchange was equal becomes untenable as traffic flows become highly unequal. Settlement-free peering works for the former, not the latter. So Comcast wants a transit style agreement where it gets paid for carrying the excess traffic.

Level 3 would prefer not to pay, and it is not alone in that desire. Unequal traffic flows do not lend themselves to settlement-free peering agreements.

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