) and Netflix (
) recently announced a mutually beneficial interconnection
agreement that will provide Comcast's U.S. broadband customers a
high-quality Netflix video experience for years to come. The press
release states that Netflix will not receive any preferential
network treatment under the multi-year agreement. This is welcome
news for Comcast, as it not only gets some monetary benefit out of
Netflix, but also opens up the door for similar arrangements with
other Internet-based services. The terms of the agreement between
the two companies are not yet disclosed. Comcast has its own
streaming service but, as part of its acquisition of NBCUniversal
in 2011, it cannot give preferential streaming treatment to its own
content over other video providers. The consent decree ends in
The agreement between Comcast and Netflix appears to be in
response to complaints over the past few months over Comcast
failing to provide adequate capacity and thus limiting data
transfers between Netflix and its streaming customers. Netflix
released data demonstrating that from October 2013 to January 2014,
Netflix customers on Comcast experienced a 27% decline in streaming
speeds during prime-time hours. Netflix would not want more
customer complaints, especially with the release of the second
season of its popular original programing series -
House of Cards.
See our complete analysis for Comcast
This deal adds color to the dispute over net neutrality, which
has been a hot topic of debate, especially after the news of
Comcast-Time Warner Cable merger (Also See -
What Does Time Warner Cable's Merger With Comcast
Mean For The Industry?
). Net neutrality is more of a principle about the way Internet
traffic is treated, specifically in the last mile to the customer's
home. It states that Internet service providers (ISPs) and
governments should treat all data on the Internet equally, not
discriminating or charging differentially by user, content, site,
platform, application, type of attached equipment, and modes of
communication. Of late, there has been an extensive debate about
bringing in a law for net neutrality. If there is no net
neutrality, ISPs can have a tiered model where traffic will move
faster for companies that can afford to pay a premium and others
will be left out with slower speeds.
However, the agreement between Comcast and Netflix clearly
states that there will be no preferential treatment for Netflix
traffic, which accounts for close to 30% of Internet traffic in the
U.S. Note that the agreement covers not the last mile to the
viewer, but the interface between Netflix' and Comcast's systems,
which are normally governed by so-called peering arrangements.
Netflix used to route its traffic through middlemen to
broadband providers. But in recent months, traffic jams developed
on some of its existing connections such as Cogent Communications,
which was a primary route for the streaming provider into Comcast.
With the growth in popularity of Netflix' service, in particular
high-definition content, the volume of data outgrew service
provider capacity to transmit it, requiring additional investment.
The specific arrangements have not been disclosed.
Under the new deal, however, Comcast will connect to Netflix'
specialized servers at data centers operated by other companies,
providing a better streaming experience to the end customers.
It appears that this deal will open a new stream of revenues for
Comcast, thus providing a return on the capital investment required
to boost capacity for Netflix' streaming. Observers note that it
may serve as a precedent to other streaming content and service
providers, or other services that involve heavy data traffic.
Moreover, it can be offered as a complimentary market-based
solution in the debate over net neutrality, which has been reversed
at the appellate level in the US but remains as an issue in dispute
on both sides of the Atlantic.
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