Netflix paper sleeve (Source)

NewTeeVee/GigaOM found some interesting accusations in Netflix's annual filings with the Securities and Exchange Commission (all publicly traded companies make these types of filings) pointing a finger directly at Comcast for threatening to discriminate against Netflix traffic if it didn't pay a fee:

"(In) late 2010, Comcast informed Level 3 Communications that it would require Level 3 to pay for the ability to access Comcast's network. Given that much of the traffic being requested by Comcast customers is Netflix data stored with Level 3, many commentators have looked to this situation as an example of Comcast either discriminating against Netflix traffic or trying to increase Netflix's operating costs."

There's a complex history to all of this and it's an on-going story. Level 3, and now Netflix, are basically accusing Comcast of (legal but reprehensible) extortion, demanding that Level 3 and/or Netflix pay Comcast money for delivering Netflix content to Comcast's cable customers, even though Netflix doesn't do business with Comcast.

Comcast says this is all very standard business in the Internet world. In most cases, very big companies that own and run the Internet backbone will spend money to create high speed connections between each other's networks with the understanding that neither side will charge for the connection, so long as both sides benefit equally from it (you send me as much traffic as I'm sending you.)

If the data going in one direction becomes lopsided, one company is expected to pay the other for the connection.

Comcast says this is the case and it's doing nothing wrong. Level 3 and Netflix disagree.

Either way, this just underscores how critical it is for the FCC to create and enforce sensible, effective net neutrality rules sooner rather than later.