Comcast forces Netflix partner to pay a 'toll' to deliver video

An Internet service provider who competes with Netflix is now setting up a roadblock which could prevent consumers from streaming movies online.

Critics have compared Comcast's recent demand that a Netflix partner pay a fee to deliver video over its network to extortion and blackmail.

Netflix partner Level 3 claims that on Nov. 19 Comcast demanded a reoccurring fee to "transmit Internet online movies and other content to Comcast’s customers who request such content."

"Level 3 agreed to the terms, under protest, in order to ensure customers did not experience any disruptions," Thomas C. Stortz, chief legal officer for Level 3, said in a statement Monday.

Comcast has said that the disagreement was "a simple commercial dispute" and had nothing to do with network neutrality.

Net neutrality is a principle that asserts that Internet service providers (ISPs) like Comcast should not be able to place restrictions on content delivery. There are currently no regulations preventing ISPs from arbitrarily charging tolls or blocking content.

The Federal Communications Commission (FCC) was expected to take up the issue at its December meeting but that may be delayed so that regulators can have time to approve the merger of Comcast and NBC Universal.

"With this action, Comcast demonstrates the risk of a ‘closed’ Internet, where a retail broadband Internet access provider decides whether and how their subscribers interact with content," Stortz said.

The FCC is considering forcing Comcast to allow open third-party video streaming but executives met with government officials last week to oppose such a move.

"In theory, without government action, Comcast could speed up streams of NBC programs and slow down streams of its rivals’ programs," noted The New York Times' Brian Stelter.

NBC Universal indirectly competes with Netflix via its interest in Hulu, one of the largest video sites on the Internet. Comcast also has its own video on demand service which competes with Netflix.

"This may be one of those teaching moments for consumers to understand what's at stake," Michael McGuire, a media analyst for Gartner told the Times.

"There is no law here. There are only guiding principles. FCC clarity on this kind of thing is going to be required," McGuire said.

The Comcast/NBC Universal merger is also seeing opposition in the Senate where Sen. Al Franken (D-MN) has called for a Justice Department anti-trust investigation.

"The Department of Justice and the Federal Communications Commission have yet to complete their review of the proposed Comcast and NBC Universal merger. And yet, by publicly announcing their intended managers of each component of NBC Universal, Comcast has effectively told employees at NBC Universal who their 'real bosses' are," Franken said.

Additionally, the American Cable Association's (ACA) has said the merger "will send monthly cable bills higher by billions of dollars over the next decade."

A study (.pdf) published by the ACA "concluded that the transaction will allow Comcast-NBCU to raise programming fees way above levels the two would be able to command as separate and independent companies, and that these fee increases will largely be passed through to subscribers in the form of higher subscription prices."

"[T]he quantifiable consumer harm of the transaction ($2.566 billion) is more than 10 times greater than the quantifiable consumer benefit ($204 million) claimed by Comcast-NBCU."