Netflix cuts deal with Comcast to speed up service

Netflix said Sunday it has agreed to a new deal with Comcast to ensure that its movies and TV shows stream more quickly, the latest evidence of a shift in the balance of power in favor of Internet access providers and the likelihood of rising prices for consumers.

The companies didn't disclose the terms of the deal.

Emboldened by a recent court ruling that eliminated "net neutrality" rules that prohibited Internet providers from prioritizing content, Comcast and others cable companies have been showing signs that they will dictate more aggressively how content is sent through their "pipes."

Proponents of net neutrality fear that broadband providers -- mostly cable and satellite companies -- will seek payment from content providers for quicker streaming without a bottleneck and prefer movies and TV shows made by its own subsidiaries or partners companies. Internet providers' changing priorities could result in higher fees for consumers as content providers - having to pay to ensure smooth streaming - pass on the cost to end-users.

Netflix eats up much of the Internet traffic, particularly in evenings, occupying about 32% of the downstream traffic in North America, according to network technology company Sandvine.

Calling it "a mutually beneficial" agreement, Netflix and Comcast said the deal will provide Comcast broadband customers "a high-quality Netflix video experience for years to come."

"The companies have established a more direct connection between Netflix and Comcast, similar to other networks, that's already delivering an even better user experience to consumers, while also allowing for future growth in Netflix traffic," the companies' statement said. "Netflix receives no preferential network treatment under the multi-year agreement."

Comcast's friendly agreement with the most popular U.S. streaming service comes at a curiously opportune period. Earlier this month, the Philadelphia-based company agreed to buy Time Warner Cable for $45.2 billion to combine the nation's two largest cable operators, a deal that will trigger heavy scrutiny from antitrust regulators. They don't compete in the same markets. But their marriage will create a video and Internet giant with a broad national footprint and heavy influence over content sent through its network.

"We now have an Internet service provider telling content providers that the only way its service can work is if you pay an extra fee," says Michael Weinberg, vice president of digital advocacy group Public Knowledge. "The Internet service provider is injecting itself into the relationship between Netflix and its customers."

Aware that its shows are hogging the Internet, Netflix has been working with Internet service providers (ISP) -- in a program called Open Connect -- to install its own storage servers within the ISPs' networks. Comcast and Verizon have not participated in the program.

Netflix is not calling its agreement with Comcast an Open Connect deal. But similar technology methods are used and Netflix directly connects to Comcast's network.

Still, Netflix has been open about the fact that Open Connect is a free arrangement for ISPs. That the latest agreement didn't spell out the financial terms likely indicates that a type of payment exchanged hands, Weinberg says.

"It looks like Netflix is paying to make sure its subscribers can access what they're paying for," he says. "Open Connect has been transparent. It's been free."

Comcast customers have been vocal online and in social media channels about the slow streaming speeds for Netflix's content. Netflix also has gone public with its assessment of the transmission speeds of various ISPs.

In its "ISP speed index" released in January, Netflix said Comcast's speed – 1.51 megabits per second – ranked 14th out of 17 ISPs measured. Verizon's DSL service ranked last.

The bottleneck likely occurred at the point where Netflix's data enter Comcast's network, Weinberg explained. Like a drawbridge where goods enter a castle, the entry point to Comcast's network was heavily congested as Netflix customers individually ordered movies and shows.

"There were many copies that were entering Comcast's network," he said. "We're going to see a lot more of these problems in the next year or two…with the dispute turning on data entering and leaving the network. Comcast is in this gate-keeping position. They can tell Netflix if you want to work with us, you also pay. Netflix subscribers end up paying more so that Netflix can pay Comcast to access Comcast network."


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