Dec 21, 2010 11:07 AM,

Level 3 ties Comcast dispute to NBCU deal

By Dan O'Shea

Wholesale carrier tells FCC cable TV giant has competitive reasons to discriminate against online video

The Federal Communications Commission is expected to greenlight new Net Neutrality rules today, but Level 3 Communications has moved on to the next battle, pressing for the regulatory agency to factor the ongoing Net Neutrality flap between Level 3 and Comcast as it weighs whether or not to approve Comcast’s NBC Universal deal.

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And, in a separate communication with Comcast, Level 3 accused the cable TV giant of breaking a non-disclosure agreement between the companies by talking to the FCC and others about details of a potential resolution to the dispute that Level 3 eventually walked away from, according to Comcast. The dispute has been going on since late last month, when Level 3 complained that Comcast had demanded extra fees for carrying Level 3 traffic that included Netflix streaming video to Comcast customers. Level 3 said that violated Net Neutrality rules, but Comcast characterized the issue as a peering disagreement.

In an ex parte submission to the FCC last Saturday, Level 3 called the dispute “highly relevant” to the FCC’s evaluation of the Comcast-NBCU deal and whether the transaction will have potential anticompetitive impacts. Level 3 said Comcast, in previous submissions to Congressional committees, as well as statements on its own blog, characterized online video, such as that available from Netflix, as a competitive alternative to its cable TV offering. These statements show that Comcast has reason to discriminate against online video traffic, Level 3 said.

“After the NBC Universal acquisition, Comcast’s incentive to discriminate is increased, as those providers now also compete against Comcast’s affiliated Hulu and NBC content,” the Level 3 submission stated. Furthermore, even if online video is viewed as a separate market from cable TV, the deal would give Comcast more reason to play a gatekeeper role.

In the separate letter to Comcast, level 3 asked Comcast to correct public statements in which it characterized Level 3 as unwilling to pursue a resolution to the dispute.