There’s a dispute going on right now between Comcast and Level3 Communications concerning the peering agreement between those two companies. Comcast says the dispute has nothing to do with the fact that Level3 just got the Netflix video streaming contract while most observers think that’s all it has to do with.

I think so, too.

Peering is at heart nothing but restraint of trade. Peering came about when various Internet backbone providers noticed they were all connected to the same big data centers and points of interconnection, normally inside telco central offices. Simply pulling an Ethernet cable from one rack to another could interconnect millions of users from two different backbone providers, saving time, distance, router hops and total bits in the process. Peering agreements typically involve no exchange of money since they are intended to be between peers — very similar companies of roughly comparable size that would be sharing equal numbers of bits back and forth. Peering agreements were for big companies, especially backbone providers interconnecting with the fundamental idea that they’d be giving as many bits and they got and therefore no direct compensation would be required. It also kept smaller companies out of the backbone business because they were made to pay, and dearly.

Level3 is mainly a backbone company that is lately delivering a lot of streaming video, too. Comcast points to the disparity between the number of Netflix video bits served (a lot) to the number received (almost none for Netflix other than some Quality of Service data and of course the movie orders). That’s not the deal, says Comcast, which wants Level3 to pay the difference in cash.

On the other hand, Comcast for the most part isn’t an Internet backbone provider. They have some backbone assets, sure, but mainly they are America’s largest broadband ISP. So while Comcast can fault Level3 for taking advantage of their peering agreement terms, Level3 could as easily drop peering with Comcast altogether, still getting to Comcast viewers through other peers, though with the addition of some latency from the extra hops required.

Note that Netflix formerly did its streaming through Akamai’s Content Distribution Network (CDN) which shares revenue with participating ISPs.  Level3 probably got the Netflix gig by beating Akamai on price and they beat Akamai on price because they are relying on that darned peering agreement to make it possible.

As an ISP, Comcast could afford to drop one backbone, but not all of them, so Level3 has some power here — more than many commentators have noticed.

There is a lot of posturing here, so let’s try to figure out the real issue, which I think is Google.

Google has long wanted to drop a rack or a container or at least its own fiber connection two hops from every broadband user in Ameica and eventually the world. They’d like to do that through peering agreements like Level3 and certainly have as much of an argument as Level3 has for doing so, given Google’s own fiber assets, which are certainly more than Comcast’s. But Google will pay for access if it must, because global domination is worth the price.  The search giant is willing to pay if it must for guaranteed access.

Comcast knows this. As America’s largest broadband ISP, Comcast stands to gain more than any other company from allowing Google to run fiber into every head-end data center the company has. But Google won’t pay if they don’t have to. So to make sure Google pays, Comcast has to make sure Level3 pays.

That’s all it is. Both sides are distorting the peering agreement like crazy to make their points, which aren’t about equity, net neutrality, user rights, legal theory, who is actually paying for the bandwidth (customers), or anything else — just Google’s money.