Level 3’s (NasdaqGS: LVLT) recent complaint concerning Comcast (NasdaqGS: CMCSA CMCSK) and its fee structure for content delivery, while treating the company as a CDN (Content Delivery Network) sounds as if someone is not playing by the rules. In fact, this just reinforces that the “free market economy” is at work as envisioned in our economic model.
“A free-market economy is an economy where all markets within it are unregulated by any parties other than those players in the market. In its purest form the government plays a neutral role in its administration and legislation of economic activity neither limiting nor actively promoting it (for example, neither regulating industries let alone owning economic interests nor offering subsidies to businesses let alone protecting them from internal/external market pressures).”
Although our government does intervene in certain economic conditions and issues subsidies where dire consequences to a sector is at stake; on the whole, it does not get involved in private company disputes. That is the role of the Federal Trade Commission where bad actors are taken to task in the courts for market manipulation or anti-competitive behavior.
In this case a company “cries foul” due to increased prices for the handling of their content over another content provider’s network. Although Level 3 has increased the level of content delivered over Comcast’s network substantially, it does not feel a price increase is warranted and therefore complains to the FCC.
“Comcast has long established and mutually acceptable commercial arrangements with Level 3′s Content Delivery Network (CDN) competitors in delivering the same types of traffic to our customers. Comcast offered Level 3 the same terms it offers to Level 3′s CDN competitors for the same traffic. But Level 3 is trying to gain an unfair business advantage over its CDN competitors by claiming it’s entitled to be treated differently and trying to force Comcast to give Level 3 unlimited and highly imbalanced traffic and shift all the cost onto Comcast and its customers.”
Level 3’s official statement on disagreement with Comcast:
“Level 3 and Comcast have been in a disagreement over Comcast’s announced intention to demand an ongoing payment from Level 3 and others for delivering content to Comcast, such as movies that Comcast’s subscribers have requested. Comcast has said repeatedly that “this is just a good old fashioned peering dispute” and that Level 3 is just trying to gain “an unfair advantage over its competitors by gaining enormous capacity at no cost to itself.” Comcast’s characterization could not be more misleading. What is truly at stake is whether consumers should have unfettered access to all the content on the Internet without regard to whether that content happens to be owned or packaged by Comcast.”
On the surface it looks as though Level 3 is using Netflix, a Cable Industry competitor and whose programming is being distributed over Comcast’s network, to its advantage. In fact, if Comcast is charging Level 3 the same price as other similar CDN distributors, as they indicate is the case; there is no argument for anti-competitive behavior as envisioned in their statement. It is just a case of the free market system at work.