Level 3, Comcast Trade Shots

Speaking to investors this week, Level 3 and Comcast both tried to present their side of the spat over payments for network traffic, and it seems Comcast got a bit more sympathy -- or at least fewer questions

Level 3 President and Chief Operating Officer Jeff Storey said the network handoff between Comcast and Level 3 for Netflix's traffic is not peering, which is the exchange of traffic between two backbone networks. He said it is actually local sharing.

We carry Netflix's traffic from San Francisco to Philadelphia and until we no longer have a choice but to hand it off to Comcast. We've responded to their request by delivering traffic at the last possible point. That's not peer sharing, Storey said.

Storey said Comcast is attempting to get Level 3 to pay a toll access. In a blog post on Level 3's website, the company says Comcast's position as the nation's largest provider of broadband consumer services allows them to force Level 3 to do this.

If I were handing off traffic to Comcast in New York City and expecting them to carry it to San Diego, I would expect to pay for that. That's not what we're doing, Storey said.

If no resolution is found, the loser in this whole ordeal could be the customer, says Storey. He said higher fees would be passed on to the buyer of capaciy -- in this case Netflix -- who would in then pass it on to the consumer.

While Storey said the material is not financially critical, he believed it was critical with the way the internet has evolved. He would not speculate as to why they are insisting on implementing this payment demands. Presumably they see this as a way to make money, he said.

During the question and answer period, investors repeatedly brought up the traffic-sharing agreement, and didn't give Story much chance to talk about financials or strategy, as is customary.

Later that day, in a separate presentation at the same conference, Comcast Cable President Neil Smit said Level 3 was once happy to take the same position Comcast did. They are trying to implement a change in industry practice, he said. They took Comcast's current position not too long ago.

Smit's audience was not as contentious as Level 3's. Most of the questions centered on the pending merger with NBC Universal and the introduction of Comcasts' iPad app -- almost anything except the dispute with Level 3.

On its website, Comcast answered many of the issues brought up by Level 3. The company said it exchanges roughly balanced traffic on a settlement-free peering basis with Level 3. It also said to accommodate Level 3's heightened Netflix traffic, it gave the Broomfield, Colo., Company six free ports.

If Level 3 did not want to accept Comcast's standard and commercially reasonable proposal, it could have refused the agreement, and sent traffic to us up the limit permitted in our preexisting agreement, and then sought other paths for its remaining traffic, Joe Waz, Comcast senior vice president for external affairs and public policy counsel, said in a blog post.