Netflix to Pay Comcast for Faster Web Access
Information about Netflix to Pay Comcast for Faster Web Access
Business & Mgmt
Published on February 24, 2014
Netflix has agreed to pay Comcast additional fees to pay for more-direct access to Comcast’s broadband network to improve speeds and video resolution for its streaming services.
The companies announced their multiyear agreement yesterday, however they didn’t disclose any terms associated with the deal. Netflix, faced with complaints from subscribers regarding the quality and speed of their streaming services in recent weeks, agreed to pay Comcast millions of dollars annually to deliver its content more efficiently. Netflix is the world’s largest subscriber-based video streaming service in the world and now joins companies like Google and Facebook that already pay Comcast for premium content delivery network access. The agreement comes as a surprise to many since Netflix could have used it as leverage while Comcast attempts to acquire Time Warner Cable Inc.
“I would have thought Netflix would have held out with the Time Warner Cable deal looming,” Craig Moffett, founder of research firm MoffettNathanson LLC, said in an interview. “Netflix can ask for whatever it wants and has a reasonable shot at getting conditions put on the merger that could provide it with long-term benefit. On the other hand, that could be precisely what spurred this deal — that Comcast was willing to settle with Netflix for a relatively low price to make the Netflix problem go away ahead of the regulatory review.”
The agreement is a part of an effort by broadband providers to begin collecting millions in new fees from content providers who are increasingly using web networks to deliver movies, television, sports and live television programming to tablets, computers, and phones.
The deal confirms the long speculated concept of tariffs put on content providers by broadband providers. It was something that people had always expected would occur, however now that that Comcast is acquiring TWC, the process has been expedited considerably. Now, in order to get content from Point A to Point B, networks and content providers will have to pay a toll to broadband providers, and the question now becomes, when will this cost be passed on to the consumer, and in what way?
Netflix previously connected to broadband providers by paying an intermediary like Cogent Communications Group Inc., much like how a customer would pay a service provider for access to the internet. The new connections to Comcast will be taking place inside of data centers called open internet exchanges that are run by companies like Equinix Inc.
This was probably a negotiation where both sides came away feeling like they got screwed…which are actually the best negotiations. Mostly the reason is because of the pending standing on net neutrality. The agreement is a private business relationship between Comcast and Netflix — known as “peering” — and doesn’t violate any currently standing rules on net neutrality.
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