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First post-net neutrality deal? Netflix to pay Comcast for preferential internet access

Published time: February 24, 2014 17:35

Streaming video service Netflix has agreed to pay Comcast, the largest internet service provider in the United States, for direct access to the ISP’s network.

The arrangement — confirmed over the weekend first by the Wall Street Journal — will ensure that Netflix customers who rely on Comcast for their home internet service will have an easier time accessing content delivered through the streaming site.

In a joint statement, the two companies described the deal as “a mutually beneficial interconnection agreement that will provide Comcast’s US broadband customers with a high-quality Netflix video experience for years to come.”

At the same time, though, the deal means that for perhaps the first time ever a major ISP has agreed to accept money — likely millions of dollars — so that a web service can send content to subscribers as seamlessly as possible, in turn raising some real questions about the future of net neutrality and the internet business as it exists today.

Both parties involved have declined to discuss the dollar figure involved in the deal. According to the few details that have been disclosed, however, Comcast will reportedly make sure that streaming Netflix content sent through the ISP’s system will reach subscribers faster than ever by eliminating a middle man in the equation.

Up until now, data distributed by Netflix or a similar website is carried on a backbone internet provider — one of the largest web systems that much of the country’s e-info transverses — but also usually mirrored by another backbone provider that gives content to an ISP, then an individual user.

Under the terms of the new deal, Netflix will reportedly send its data straight to Comcast — an ISP with millions of customers around the globe — and bypass the middleman directly.

One of those intermediaries is a company called Cogent Communications, and up until now they have been used as a primary route between Netflix and Comcast, according to a report in the Wall Street Journal this week. For months, however, the huge swaths of data being sent by Netflix to Cogent has caused internet congestion that keeps Netflix customers from being able to quickly watch movies on-the-fly without experiencing long load times and buffering obstacles.

Between October and January, the Journal wrote, the average speeds of prime-time streams from Netflix to Comcast subscribers dropped 27 percent; speeds pertaining to data dispatched from Netflix to subscribers of another ISP — Verizon — also dropped sharply, the paper reported.

Tim Wu, a Columbia Law School professor credited with coining the phrase “net neutrality,” told the New York Times this week that the new Netflix/Comcast deal is the first such arrangement in which a broadband provider like Comcast has been compensated for allowing a content creator to send specific content through the “on ramp” of the network.

Netflix will now essentially have its own on ramp to Comcast customers,” Edward Wyatt and Noam Cohen wrote for the Times on Sunday.

But while some critics of the new-fangled contract have already called into question the possible repercussions regarding net neutrality, others — including the Times reporters — noted that the deal doesn’t exactly equate to having Comcast censor other content to keep the data dispatched by Netflix more desirable. Rather, Wyatt and Cohen wrote, the new deal “is different from paying to be moved through the pipes more quickly, a deal known as ‘paid prioritization’ that is generally seen as a net-neutrality violation.”

“Officially,” Timothy B Lee wrote for the Washington Post on Sunday, “Comcast's deal with Netflix is about interconnection, not traffic discrimination. But it's hard to see a practical difference between this deal and the kind of tiered access that network neutrality advocates have long feared. Network neutrality advocates are going to have to go back to the drawing board.”

Meanwhile, Netflix customers might soon have to reconsider their options as well: although the company hasn’t confirmed as much, skeptics say they’ll likely raise prices on their 33 million US subscribers soon to make up for the undisclosed amount they’ll be sending to Comcast for that extra on-ramp access.

Comcast will "raise the price to whatever the market will bear," Wedbush Securities analyst Michael Pachter suggested to the Los Angeles Times’ report. “This will ultimately compel Netflix to raise prices to consumers."

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