Contract disputes sometimes take on roles that are unwarranted, and the commercial dispute between Level 3 Communications and Comcast (News - Alert) about how the networks compensate each other for traffic exchanged between the two provides a good example. 

First off, Level 3 has claimed the contract dispute has to do with "network neutrality," in the sense that the exchange of traffic between the two networks is now unbalanced by the flood of video bits Level 3 is delivering to Comcast's network in the form of Netflix movies. 

Others might argue the dispute also involves the issue of "who pays for the Internet," in the sense of dramatically-higher traffic volume created expressly by consumption of video. The additional infrastructure, from backbone to local access networks, has to be paid for, one way or the other, and every participant in the revenue chain has to foist the additional cost on other ecosystem partners, or on end users, one way or the other. 

It's perhaps unfortunate that the "net neutrality" issue is raised at all, since the commercial dispute revolves around the compensation networks pay each other for exchanging unequal volumes of traffic.

When traffic is roughly equal, "settlement-free peering" works: neither network pays the other for exchanging traffic. But when traffic is unequal, or highly unequal, the normal practice is for one network, the network delivering the disproportionate traffic, to pay the other network for costs of handling such traffic. That's the alternate "transit" business arrangement, the theory and practice being that one network is consuming capacity on another, and compensates the other network for such network usage.

Level 3 Communications (News - Alert) seems to imply that transit agreements are illegal, simply because that exchanged traffic includes video bits. That will strike some observers highly familiar with network interconnection as a highly specious argument. The issue involves nothing so dramatic.

"People fall out of peering arrangements all the time," said Perry Wu, chief executive of BitGravity (News - Alert) Inc., a company that helps deliver video across the Internet, and reported in the Wall Street Journal. "Now all of a sudden you are starting to deal with such larger volumes of traffic with video. It is making it more acute."