Level 3 and Verizon Sign Interconnect Agreement: Agree To Share Cost Of Network Upgrades

Last week Verizon and Level 3 announced they had entered into a long-term interconnection agreement where both companies have agreed to share the cost to add additional capacity between their networks. Unlike Netflix and Cogent who think there should be no cost to them, Level 3 has always agreed that there is a direct cost of adding capacity on each side and that both parties should share in those upgrade costs. This is the same model Level 3 used when they signed their deal with Comcast a few years back and shows that when two companies both think rationally, a mutually beneficial agreement can be worked out between them without the need for any oversight or regulation from our government.

While I am not going to get into contract numbers, the price Level 3 is paying is extremely affordable, is one they are happy with and is locked in for a very long period of time. This is how interconnection deals between networks have historically worked and that model won’t change, even with Netflix and Cogent’s complaints. Apple, Microsoft, eBay, Facebook, Google, Amazon, Pandora, Twitch and many others have all negotiated interconnection deals with ISPs, where both sides agree how they share in the cost for upgrades. These types of mutually beneficial agreements have been going on in the U.S. for a decade and benefits the content owner, network operator, ISP and most importantly – the consumer.

Expect to see more interconnection agreements announced by multiple providers in the coming weeks.