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Couple of points: Comcast isn't buying bandwidth from Level 3. "Settlement-free peering" means no money is exchanged. The reason they don't charge each other is because it is mutually beneficial; Comcast gets to charge it's customers for access to content that passes through Level 3 and Level 3 gets to charge it's customers for access to the Comcast subscribers. The problem is that there is only a market solution for the Level 3 customers' side; if Level 3 can't accept all the traffic that their customers are sending it, they have other options with who to connect to, as there are other backbone providers. It is in their financial interest to maintain their network capacity, or their clients will go elsewhere. Comcast, on the other hand, has no market pressure. If they can't handle all the data that their customers are trying to access, their customers have no other option. They are stuck with Comcast. And therein lies the rub; what both Level 3's and Comcast's customers want is access to each other. Neither company can provide that service on their own; Comcast doesn't have a global network that can send data around the world, while Level 3 doesn't have a last-mile network that connects to all the end users. However, only Level 3 has to worry about losing its customers to a competitor. Comcast can essentially hold all parties hostage; they can demand payments from every party: end users, Level 3, and Level 3's customers. Of course, holding everyone hostage hurts everyone, including their own customers; however, since their customers have no other options, they aren't really in danger of losing them. They can hold out longer than Level 3 can, because if Level 3 doesn't agree to pay Comcast's ransom, someone else might, and Level 3 will lose their customers to whoever pays Comcast's ransom. |
Everyone except Comcast.