Stay with us, folks, this one's a little complicated. A dispute between Comcast, the country's largest Internet service provider, and Level 3, an Internet backbone provider, is striking fear into net-neutrality advocates and others worried about Comcast's growing monopoly in broadband and television. Still, it's not readily clear if Comcast has done anything egregious. Here's how this dispute began.

Level 3, a company that handles Web traffic to and from different sites, is accusing Comcast of breaching net neutrality principles. The allegation comes after Comcast imposed new fees on Level 3, which just secured a deal with Netflix to deliver its popular movie streaming service. Level 3 says Comcast's new fees are an attempt to muscle out the competition (i.e. Netflix and its partners).

"By taking this action, Comcast is effectively putting up a toll booth at the borders of its broadband Internet access network, enabling it to unilaterally decide how much to charge for content which competes with its own cable TV and Xfinity delivered content," said Thomas Stortz, chief legal officer of Level 3.

Comcast, unsurprisingly, disagrees ."Level 3 has misportrayed the commercial negotiations between it and Comcast," said Joe Waz, a senior vice president at Comcast. "This has nothing to do with Level 3's desire to distribute different types of network traffic."

This all boils down to one question: Is Comcast imposing fees on one of Netflix's partners to discourage a competitor and boost the fortunes of its own video streaming site Xfinity? Here's how industry observers are coming down on the issue:

Prior to the Netflix deal, Comcast and Level 3 had a typical industry peering arrangement. Level 3 is an Internet backbone provider and it regularly carries traffic that originates and terminates on Comcast's broadband network. Under their previous arrangement, the companies essentially swapped traffic since both networks generated equal amounts of traffic.

But with the Netflix deal, the balance of traffic between the two companies will shift dramatically. Netflix has been said to generate 17 percent of traffic on the Internet at peak times in the U.S. Comcast said in its statement that it expects to receive five times more traffic from Level 3 as part of this new arrangement.

  • Level 3 Is Now Backed Into a Corner, explains Susan Crawford, a professor at Cardozo Law School in New York:
The Comcast demand happened hard on the heels of Netflix’s announcement that it was going to be moving its streaming business from Akamai to Level 3.  Just eight days after that announcement, Comcast lowered the boom on Level 3. Then, three days following Comcast’s request for payment from Level 3, Netflix announced it was moving to a $7.99/month streaming plan.  (I immediately signed up.)  Comcast then apparently said the demand for payment from Level 3 was take-it-or-leave-it.  No negotiation.

Now, there are different versions of what happened here.  The crucial, undeniable core of all this, though, is that Level 3 didn’t feel it was being treated fairly but also felt it had no choice but to knuckle under.  If it wanted to reach Comcast’s 25 million subscribers, it had to do the deal on Comcast’s terms.

This is presumably the first volley in what will be a long battle between companies like Netflix and broadband providers, nearly all of whom have their own video on demand services to peddle. And this type of thing is precisely the reason that net neutrality—ensuring that internet providers don't discriminate in how they deliver their content—has been and will continue to be such a big deal going forward. When service providers strong arm comparatively little guys like Netflix (and the partners upon whom Netflix relies, like Level 3) into paying higher fees, that turbulence eventually shakes down to the customer, either in the form of higher prices or interrupted service. Big corporate greed ends up screwing John Q. Public—it's nothing new, but it's always frustrating.

  • Activists Are Rooting for the Underdog, reports Cecillia Kang at The Washington Post:

Public interest groups held up Level 3’s claims as evidence that Comcast’s proposed merger with NBC Universal could hurt competition and consumers.

“This case clearly establishes that Comcast is engaging in grossly anti-competitive conduct and is a serial violator of the FCC’s Net Neutrality policies,” said Derek Turner, a research director at public interest group Free Press. “Despite its calls for self-regulation, Comcast has demonstrated time and again that it will push the boundaries of the law without any concern for how its actions harm consumers.”

Experts say that Level 3 may be exploiting the tension over Net neutrality to negotiate more favorable business terms for itself. "If this turns out to be a fight over peering arrangements, then this clearly has nothing to do with Net neutrality," said Larry Downes, a consultant and author, who has contributed columns regarding Net neutrality and other Internet issues on CNET.

  • This Is Not a Clear Cut Case, writes Ryan Singel at Wired:

In this case, Comcast says it feels that it is taking in more Level 3 traffic than it is sending out through the connection, and therefore wants Level 3 to pay for the disparity — regardless of the kind of content Level 3 is sending its way.

Level 3 could be simply playing the net neutrality card in what is actually a routine business dispute. Or Comcast could be trying to increase the cost of online video to protect its cable business and its pending purchase of NBC, which owns nearly a third of the online video site Hulu. Given how murky and complicated the net’s interconnection system works it’s hard to actually tell the difference between rhetoric and fact in this dispute.