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2/24/2014
12:20 PM
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Netflix Deal With Comcast: Net Neutrality Domino?

Netflix pays cable provider for fast, reliable service. Consumer advocates fear it's the first of many deals to come.

Netflix and Comcast announced a deal on Sunday whereby the bandwidth-hungry movie and television streaming service will pay the nation's largest cable provider for fast, reliable access to its subscribers.

It's being hailed as a landmark deal that acknowledges a weakening of Net neutrality rules that once ensured free and equal access to Internet bandwidth regardless of capacity demands. In January, a federal appeals court struck down Federal Communications Commission Net neutrality rules, saying the agency had overstepped its authority.

Proponents of Net neutrality have argued that major US carriers, including Comcast, Verizon, and AT&T, could wield too much power over content providers without rules preventing them from restricting access to bandwidth and charging premiums based on capacity demands. Netflix, producer of the popular House of Cards series, accounts for as much as a third of Internet traffic during peak viewing hours.

[Want more on the court ruling against FCC? Read Net Neutrality Court Ruling Won't Ruin The Internet.]

Last week, the FCC proposed new rules that would prevent Internet service providers from blocking legal sites or services from consumers and would restrict, but not ban, carriers from selectively restricting bandwidth. InformationWeek columnist Jonathan Feldman has argued that Carriers Won't Win The War On Netflix and other content providers because network monitoring will make restrictions obvious and they could not withstand the resulting public outcry.

The deal with Comcast signals that Netflix isn't counting on new Net neutrality rules and wasn't prepared to gamble with the customers' streaming experience. Terms of the deal were not divulged, but a source told The New York Times that Netflix will pay Comcast several million dollars per year to provide more direct and reliable access to its content, bypassing intermediary connections to its network to ensure steady streaming free of pauses and hiccups.

Image credit: Wikipedia.
Image credit: Wikipedia.

The deal comes just 10 days after Comcast agreed to pay $45 billion to acquire Time Warner Cable, a deal that, if approved, will give the company a third of the US cable market and 40% of the broadband Internet access market. There have also been reports that Verizon, another giant among carriers, has been restricting access to Netflix in the wake of the court ruling on Net neutrality rules, a charge that the carrier denied.

Consumer advocates fear that the Netflix-Comcast deal will spark similar deals with the cost of the fees passed along to the consumer. Will carriers be able to hold content providers over a barrel until they agree to pay fees for adequate bandwidth? It remains to be seen whether the FCC will attempt to step in to prevent such deals or whether its new rules will stand up to court scrutiny.

Engage with Oracle president Mark Hurd, NFL CIO Michelle McKenna-Doyle, General Motors CIO Randy Mott, Box founder Aaron Levie, UPMC CIO Dan Drawbaugh, GE Power CIO Jim Fowler, and other leaders of the Digital Business movement at the InformationWeek Conference and Elite 100 Awards Ceremony, to be held in conjunction with Interop in Las Vegas, March 31 to April 1, 2014. See the full agenda here.

Doug Henschen is Executive Editor of InformationWeek, where he covers the intersection of enterprise applications with information management, business intelligence, big data and analytics. He previously served as editor in chief of Intelligent Enterprise, editor in chief of ... View Full Bio

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D. Henschen
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D. Henschen,
User Rank: Author
2/24/2014 | 12:30:03 PM
Pollyannas think carriers won't use their clout
The court of public opinion will not hold carriers in check. How many times have these guys held up Fox, CBS and other big content providers in the cable world? Now it's happening with Internet content, and the only thing to stop them from holding content providers over a barrel is the law. There's not enough competition and freedom of choice for the free market to work.
Lorna Garey
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Lorna Garey,
User Rank: Author
2/24/2014 | 1:15:53 PM
Re: Pollyanna's think carriers won't use their clout
There's also the fact that this helps Netflix stifle competition. It can afford to pony up the vig to Comcast. A smaller startup seeking to compete? Not so much. It's bad for consumers.
dallasdivr
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dallasdivr,
User Rank: Apprentice
2/24/2014 | 2:07:53 PM
Re: Pollyannas think carriers won't use their clout
This sounds to me like a peering arrangement.  If so, it's completely different than net neutrality.  With peering Netflix is tying their network directly to Comcast's to remove intermediaries.  Net neutrality is about throttling a sites throughput.  One is about a carrier intentionally slowing down a site's traffic, the other is about a site getting closer (network wise) to their end customer.  In peering one side will typically pay if the traffic between the two networks is imbalanced.  I'm pretty sure Netflix sends more traffic to Comcast than Comcast to Netflix.

 

The sky isn't falling yet.
JarinArenos
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JarinArenos,
User Rank: Apprentice
2/24/2014 | 2:25:36 PM
Re: Pollyannas think carriers won't use their clout
This misses the context here. Comcast HAS been throttling Netflix data. This is not a peering arrangement, this is the mob standing outside the Netflix china shop with baseball bats saying "It'd be a shame if anything happened to your data..."

Edit: For clarification, peering was the deal Comcast made with Netflix's partner "Level 3" several years ago. Forcing a fee on Netflix directly is the dangerous step. 
jfeldman
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jfeldman,
User Rank: Strategist
2/24/2014 | 2:40:47 PM
Re: Pollyannas think carriers won't use their clout
Actually, according to Light Reading:

... here are the facts. The new peering agreement does not mean that Comcast will put Netflix's caching appliance in its last-mile network the way some other providers have. Several outlets are reporting that Comcast is not supporting the Netflix appliances, and Light Reading has confirmed with a source close to the deal that this is indeed the case.


There's nothing that says or implies that the bogeyman is present: traffic priority is not being bought and paid for.  In fact, LR reported Comcast as saying, "Netflix receives no preferential network treatment under the multi-year agreement." 
D. Henschen
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D. Henschen,
User Rank: Author
2/24/2014 | 3:32:43 PM
Re: Pollyannas think carriers won't use their clout
Reports have it that both Comcast and Verizon have been crimping Netflix' bandwith since the January ruling on Net neutrality. Yes, there are technical differences between "paid peering" and "paid prioritization," but the bottom line is that Netflix is paying a carrier money to ensure good service. Which content provider will be next and how many carriers are going to get on that line for payments?
Lorna Garey
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Lorna Garey,
User Rank: Author
2/24/2014 | 4:41:46 PM
Re: Pollyannas think carriers won't use their clout
"In fact, LR reported Comcast as saying, "Netflix receives no preferential network treatment under the multi-year agreement."

Come on, if that's so, what are they paying for? To NOT be slowed down? That sounds much like the baseball bat/china shop analogy.
danielcawrey
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danielcawrey,
User Rank: Ninja
2/24/2014 | 8:15:13 PM
Re: Pollyannas think carriers won't use their clout
I understand from the Comcast side of things why they feel that Netflix should pay them money. Netflix is basically running content through Comcast's lines. It's a bit of a conflict of interest. 

At the same time, this deal is not good for regular internet users. There is no neutrality anymore. But then again, one has to consider the fact that no one user is ever going to take up a third of all bandwidth. So in concept this is a problem but the reality of what it means is harder to grasp. 
WKash
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WKash,
User Rank: Author
2/24/2014 | 8:31:55 PM
Re: Pollyannas think carriers won't use their clout
Everytime we see content providers and carriers go at it over proposed rate increases, and the war of ads begins over who's depriving whom of service, it's clear that those who control the pipes into homes and businesses have too little competition. Time for the FCC to finally have the same oversight over Internet providers as they do broadcasters.

 
Charlie Babcock
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Charlie Babcock,
User Rank: Author
2/24/2014 | 8:35:20 PM
Netflix motivated to pay to safeguard customers, discourage competitors
Netflix is willing to pay, not just to protect its customers' streaming needs, but to increase the price of admission for potential Netflix competitors. Amazon would also like to be a streaming content provider but it may not have counted on the cost of streaming going up, now that it's investing in content.
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