Comcast and Netflix announced on Sunday that they've entered into a multi-year agreement to provide U.S. Comcast customers with a "high-quality Netflix video experience for years to come."
What it reportedly comes down to is that Netflix is paying some amount of money for access to Comcast's network, and it represents a strategy that Netflix could pursue with other providers. According to The Wall Street Journal, citing someone familiar with the matter, Netflix is likely to compensate other big providers.
"Working collaboratively over many months, the companies have established a more direct connection between Netflix and Comcast, similar to other networks, thats already delivering an even better user experience to consumers, while also allowing for future growth in Netflix traffic," the companies explain in the announcement.
Both companies maintain that Netflix receives no preferential treatment.
Dan Rayburn at StreamingMedia.com has a rant about how the deal is being portrayed in the media, which has often been through the lens of net neutrality debate, which he says is not right. He writes:
Commercial interconnect relationships, also referred to as paid peering agreements, have been around since the Internet started, and it’s how the Internet works. Commercial interconnect deals have NOTHING TO DO WITH NET NEUTRALITY. Implying otherwise shows a complete lack of regard in understanding how traffic is and has been exchanged across networks for the past twenty years. The media as a whole should stop trying to insinuate or imply that everything that happens between two networks comes down to Net Neutrality. It doesn’t.
Today’s news is very simple to understand. Netflix decided it made sense to pay Comcast for every port they use to connect to Comcast’s network, like many other content owners and network providers have done. This is how the Internet works, and it’s not about providing better access for one content owner over another, it simply comes down to Netflix making a business decision that it makes sense for them to deliver their content directly to Comcast, instead of through a third party. Tied into Netflix’s decision is the fact that Comcast guarantees a certain level of quality to Netflix, via their SLA, which could be much better than Netflix was getting from a transit provider. While I don’t know the price Comcast is charging Netflix, I can guarantee you it’s at the fair market price for transit in the market today and Comcast is not overcharging Netflix like some have implied. Many are quick to want to argue that Netflix should not have to pay Comcast anything, but they are missing the point that Netflix is already paying someone who connects with Comcast. It’s not a new cost to them.
Still, not everyone's convinced of Rayburn's argument. Some are skeptical due to the timing, and the lack of disclosure about specific terms of the deal.
The deal comes after Netflix told shareholders in a letter accompanying its recent earnings report that it would fight ISPs and encourage customers to protest if providers should impede video streams. This is in light of a recent net neutrality ruling in favor of Verizon. Netflix CEO Reed Hastings and CFO David Wells wrote:
Unfortunately, Verizon successfully challenged the U.S. net neutrality rules. In principle, a domestic ISP now can legally impede the video streams that members request from Netflix, degrading the experience we jointly provide. The motivation could be to get Netflix to pay fees to stop this degradation. Were this draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver.
The most likely case, however, is that ISPs will avoid this consumer-unfriendly path of discrimination. ISPs are generally aware of the broad public support for net neutrality and don’t want to galvanize government action.
With Comcast having announced the pursuit of an acquisition of Time Warner Cable, this deal will affect all the more Netflix subscribers throughout the country. There are 30 million of them in all. Reports last week indicated that the the Time Warner acquisition has impeded progress of talks between Netflix and Time Warner regarding offering Netflix through TWC's set-top boxes.
Netflix and YouTube together account for roughly half of broadband traffic in the U.S.
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