Peering Dispute Between Comcast and Level 3 is Not Unusual

Despite the colorful nature of the Level 3 Communications dispute with Comcast over interconnection arrangements, the dispute is a rather typical commercial dispute between interconnection partners.

In the past, when traffic exchanged between the Comcast network and Level 3 was roughly equal, it made sense to peer the networks on a "settlement-free" basis. Now that traffic flows are about to become quite unbalanced, that won't work.

With the massive new Netflix CDN deal where Netflix is currently the largest source of traffic in North America, Level 3 will likely start sending five times more traffic to Comcast than it receives.

When that happens, a "settlement-free" peering arrangement often becomes a "for-fee" transit agreement, where the network imposing an unequal traffic load pays the other network.

That's the situation here, where a business relationship that worked well when traffic exchange was equal becomes untenable as traffic flows become highly unequal. Settlement-free peering works for the former, not the latter. So Comcast wants a transit style agreement where it gets paid for carrying the excess traffic.

Level 3 would prefer not to pay, and it is not alone in that desire. Unequal traffic flows do not lend themselves to settlement-free peering agreements.

Digital Society Level 3 outbid Akamai on Netflix

For-Fee Online Video Demand Still Nascent

A new study by Ipsos finds that some viewers are willing to pay for online video, though much depends on the payment model and the actual type of content.

In a survey of 18-to-34-year olds, Ipsos found that 51 percent of respondents were interested in fee-based models from Hulu, Netflix or iTunes.

Ipsos OTX MediaCT created a scenario where free alternatives were not available and TV was available from Netflix at $9 a month, iTunes at $1 a download with no ads, and Hulu at $1 with ads.

While 17 percent of the younger demo was interested in a pay-per-episode Hulu model, only 11 percent of those 35 and older wanted to buy that way. Overall 49 percent of youth had no interest in pay models while 70 percent of the 35+ group suggested they were not interested in such fee-based offerings.

Eagerness to use the Web to catch up on or re-experience TV content varies a bit from genre to genre and even more from show to show. People are more likely to want to re-watch comedies than other genres, but a subscription service like Netflix was more appealing for its run of dramas since viewers wanted access to whole season.

MediaPost Publications Young Video Viewers Will Pay for Their Online TV 11/30/2010

Google Wants Groupon Because Social Ads Are the Future: Tech News «

http://gigaom.com/2010/11/30/google-wants-groupon-because-social-ads-are-the-future/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+OmMalik+%28GigaOM%3A+Tech%29&utm_content=Google+Reader

Is email growing or shrinking?

Both, it seems.

http://www.marketingcharts.com/direct/inboxcom-gmail-show-impressive-annual-growth-15170/?utm_campaign=rssfeed&utm_source=mc&utm_medium=textlink

And you thought net neutrality couldn't get more convoluted

Now interconnection agreements get tarred.

http://www.digitalsociety.org/2010/11/comcast-level-3-net-neutrality-the-new-fire-in-a-movie-theater/?utm_source=rss&utm_medium=rss&utm_campaign=comcast-level-3-net-neutrality-the-new-fire-in-a-movie-theater

Interconnection now gets sucked up with "net neutrality"

Peering and transit agreements aren't net neutrality issues.

http://247wallst.com/2010/11/30/the-next-round-of-fighting-over-net-neutrality-nflx-lvlt-cmcsa-ge-vz-goog/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+typepad%2FRyNm+%2824%2F7+Wall+St.%29&utm_content=Google+Reader

Clearwire races towards target of 120m POPs - Rethink Wireless

So much for the couple of years headstart over other 4G providers.

http://www.rethink-wireless.com/2010/11/30/clearwire-races-towards-target-120m-pops.htm

Who Wins in Tablet Business?

Apple, Google, Motorola, Samsung and HTC could be early winners as tablets start to cannibalize the PC market, some might argue.

Dell, Hewlett-Packard and Acer could be losers, some think.

Tablets Will Displace PCs: Picking Winners and Losers -- Seeking Alpha

Verizon FiOS Broadband Penetration?

Analysts at Trefis expect the penetration of FiOS broadband to reach 81 percent of Verizon broadband subscribers by 2016, up from about 49 percent in 2010. In other words, of Verizon customers who buy broadband access, 81 percent will buy FiOS, while the remaining 19 percent will be on digital subscriber line platforms.

Verizon FiOS Penetration Rising -- Seeking Alpha

Entertainment Video Accounts for 37% of Peak-Hour Bandwidth

As much as 37 percent of peak-hour Internet traffic might be entertainment video.

Mary Meeker Internet Trends presentation

Is Level 3-Comcast Dispute a Typical Spat Over Peering Fees?

Thomas Stortz, Chief Legal Officer of Level 3, says Comcast has demanded, and is getting, payments from Level 3 related to delivery of Internet traffic from the Level 3 network to Comcast's network. It isn't immediately clear whether this is simply a commercial dispute between networks that exchange unequal amounts of traffic, or a possible violation of "Internet Freedoms" principles.

That's one of the difficulties with "network neutrality." It sometimes is difficult to separate out "content discrimination" from simple commercial agreements to exchange traffic between networks.

Stortz says taht “on November 19, 2010, Comcast informed Level 3 that, for the first time, it will demand a recurring fee from Level 3 to transmit Internet online movies and other content to Comcast’s customers who request such content."

“On November 22, after being informed by Comcast that its demand for payment was ‘take it or leave it,’ Level 3 agreed to the terms, under protest, in order to ensure customers did not experience any disruptions," says Stortz.

Press Release - Level 3 Communications

Microsoft in talks for new online TV service

Microsoft Corp has held talks with media companies to license TV networks for a new online pay-television subscription service through devices such as its Xbox video game console, says Reuters.

The maker of the Windows operating system has proposed a range of possibilities in these early talks including creating a 'virtual cable operator' delivered over the Internet for which users pay a monthly fee.

Microsoft in talks for new TV service: sources | Reuters

Netflix a Fast-Growing Rival to Hollywood and Cable - NYTimes.com

In a matter of months, the movie delivery company Netflix has gone from being the fastest-growing first-class mail customer of the United States Postal Service to the biggest source of streaming Web traffic in North America during peak evening hours.

All of that has to raise fears in the content business that a powerful new entity is arising in the movie distribution business as Apple's iTunes earlier grabbed a powerful role in distributing music.

At least in part, that explains why Hollywood studios hope to create a new distribution channel to replace lost DVD revenues.

A new "premium" form of video on demand, which would make new releases available in streaming format just 45 days or so after they start showing in theaters. In the past, newly-released movies have appeared on VOD services about 120 days after theatrical release.

Video-on-demand services often price such movies at a price of about $4.99. But studios think the new earlier release window could allow them to price movies at perhaps $25 a view. Whether consumers will have the same value perception is not so clear.

Some believe DVD sales have stagnated because consumers no longer view $20 to $30 DVD purchases a reasonable balance of value and price. Whether consumers will think earlier streaming access is worth that much is debatable.

Studios also like the better profit margins. Generally, studios get as much as 80 percent of that early VOD revenue, and much less for a DVD copy. DVD rentals might net a studio about 30 percent margins, for example.

But an equally-important issue is maintaining more control over the distribution process, and avoiding ceding power to Netflix in the same way Apple now influences music distribution.

Netflix a Fast-Growing Rival to Hollywood and Cable

Online, Mobile Commerce Big on "Black Friday"

The U.S online retail sector delivered double digit growth on Black Friday 2010 compared to the same period last year, according to analytics-based findings by IBM. The Coremetrics third annual Black Friday Benchmark Report indicates that online sales were up 15.9 percent, with consumers pushing the average order value up from $170.19 to $190.80 for an increase of 12.1 percent.

Consumers are also embracing mobile as a shopping tool. On Black Friday, 5.6 percent of people logged onto a retailer’s site using a mobile device, a jump of 26.7 percent compared to the prior Friday. That suggests users are using their mobiles inside stores, for example, perhaps for comparison shopping.

Jewelry retailers reported a 17.6 percent increase in sales.

But there also is some evidence that consumers know what they want, where to get it and are being very targeted in their efforts to find those items. People are viewing 18 percent fewer products on sites than they did last year, suggesting that they are shopping with a specific item in mind and quickly moving on.

Consumers appear increasingly savvy about their favorite brands’ social presence, and are turning to their networks on social sites for information about deals and inventory levels. While the percentage of visitors arriving from social network sites is fairly small relative to all online visitors—nearly one percent—it is gaining momentum, with Facebook dominating the space.

read more here

Survey Finds Little Video Cord Cutting So Far, But DVDs Have Suffered

An annual study of consumer video consumption habits and platforms conducted by Frank N. Magid Associates reveals that despite the increased use of alternative video viewing platforms (like video-on-demand, set-top boxes, instant streaming, and mobile apps), the vast majority of consumers intend to continue to maintain their traditional subscriptions with cable, satellite, and telco TV providers.

So far, online and other alternative video channels are mostly complementary to existing multichannel video entertainment services. Consumers using the greatest number of alternative platforms also tend to spend the most money on traditional subscription services, the study found.

But the study also suggests the potential is far greater.

Only 10 percent of consumers express an interest in trying TV show and movie viewing from the Internet to a computer or tablet screen. In contrast, interest surges in viewing this content on a TV screen via a computer connected to the Internet, and it climbs even higher for devices designed specifically to stream content to the TV, such as AppleTV and Roku.

"The average American's capacity to consume video content is impressive," said Maryann Baldwin, Vice President of Magid Media Futures. "As new video viewing platforms such as instant streaming and mobile apps proliferate, consumers are simply adding them to their portfolio of video viewing options. Our research indicates that this is definitely not a zero-sum game -- at least at this point, it appears that traditional subscription services and alternative viewing platforms can coexist with services like 'TV Everywhere' locking in revenues for traditional providers."

In addition, the study indicates that when the availability of Internet content has caused consumers to cancel their traditional service subscriptions, these circumstances remain the exception. Only a very small minority of consumers are even considering cancelling their subscriptions.

Only one percent of consumers report that they have cancelled their subscription service in favor of accessing content available on the Internet, and only 2.5 percent of consumers use Internet content exclusively.

In terms of future cancellations, only three percent of consumers report that they are even considering cancelling their traditional subscriptions without replacing it with a competing subscription, suggesting a relatively stable subscriber base for traditional providers.

Purchase and rental of DVDs continue to be most at risk from the growth in use of alternative video viewing platforms.

The online survey was conducted in October 2010 using a nationally representative sample of 1,208 adults age 12 years or older.

read more here