The news that Level 3, which has just partnered with Netflix on online video delivery, thinks Comcast is charging them for fast service, brings the debate on net neutrality to a whole new level.

Netflix has made online streaming a major part of their business model. I’ve used the online service before and was amazed at the quality, which with Level 3′s participation should only improve. The service has become wildly popular: Netflix streaming represents 20% of all bandwidth use in prime-time hours, according to one study.

That makes it a prime target for fees. And Comcast has taken the first shot.

Level 3, which helps to deliver Netflix’s streaming movies, said Comcast had effectively erected a tollbooth that “threatens the open Internet,” and indicated that it would seek government intervention. Comcast quickly denied that the clash had anything to do with network neutrality, instead calling it “a simple commercial dispute.”

The dispute highlighted the growing importance of Internet video delivery — an area that some people say needs to be monitored more closely by regulators. Net neutrality, which posits that Internet traffic should be free of any interference from network operators like Comcast, is thought to be on the December agenda of the Federal Communications Commission.

“With this action, Comcast demonstrates the risk of a ‘closed’ Internet, where a retail broadband Internet access provider decides whether and how their subscribers interact with content,” Thomas C. Stortz, the chief legal officer for Level 3, said in a statement Monday.

I don’t know what Level 3 is talking about if they think this has nothing to do with net neutrality. It’s exactly what open Internet advocates have feared for a long time. Level 3 may have the money to pay Comcast – they grudgingly accepted the fee three days after being informed of it on November 19. But that payment will determine whether they can bring their service to users. As a result, the Internet becomes confined based on ability to pay the telecoms. This is the entire issue.

In addition, Comcast isn’t just an ISP – they’re about to purchase a major broadcast network. If you think that they won’t use their ability to turn on and off the Internet pipe in ways that favor NBC, you’re crazy.

With Netflix streaming so popular – the company is changing their business model to encourage streaming by lowering monthly rates relative to mailing DVDs – this has the ability to make net neutrality a front-line issue. “They want to take away your Netflix” is simply a stronger argument than jargon-heavy statements about packet delivery and the like. The Progressive Change Campaign Committee has already jumped on this issue in an email to supporters:

BREAKING: The New York Times just reported that Comcast will block Netflix unless a new fee is paid to Comcast — so Netflix’s price goes up and people use Comcast’s video service instead.

This outrageous abuse of power by Comcast comes on the very week that President Obama’s FCC Chairman Julius Genachowski will announce whether he’ll fulfill Obama’s promise to protect the open Internet and Net Neutrality — which would prevent this type of corporate abuse.

The FCC needs to hear from us now, before the chairman’s big announcement this week.

They have a petition available at the link. They have already assembled 30,000 signatures.