What You Need to Know About the Netflix-Comcast Deal

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monkeybrains-wireless-ispLast Sunday, Netflix announced that it has struck a deal to pay Comcast to ensure that its movies and TV shows stream seamlessly. The deal, much talked about in the business and tech press, highlights the growing problem of uninterrupted content delivery. And, it underscores just how little we regular people understand how we receive content over the Internet. Even as the media jumps to cover the Comcast-Netflix story, much of the actual technical information about how the Internet is delivered to consumers is being largely ignored. Most of the media coverage also categorizes the deal as a net-neutrality issue, but Frost & Sullivan’s Dan Rayburn says that’s just not the case. Rayburn, a principal analyst, says that the Comcast-Netflix partnership appears to be a typical (if complicated) deal between a publisher and an Internet service provider. In order to truly understand the Comcast-Netflix deal and its farther reaching implications on the Internet, we must understand how the Internet really works. Digiday spoke with Rayburn and Mitch Stoltz, a staff attorney at Electronic Frontier Foundation, and an unidentified source close to the deal in order to really understand this potentially landmark deal.

WHAT THE DEAL IS ABOUT

Comcast and Netflix are now working directly with each other. Like most media companies, Netflix just publishes content. They don’t own any Internet infastructure, so they have to pay ISP companies like Comcast to deliver their streaming movies and TV shows directly to customers. Before this deal, Netflix was delivering the content indirectly. It paid third party “transit providers” like AT&T, Level 3, Spring, and Cogent to access Comcast’s network. Essentially, they paid a middle man to access Comcast’s services. Now, they’re cutting out the middleman and working directly together. Netflix servers that are housed at a third party data center will now connect directly to Comcast’s network instead of connecting through a transit provider. Neither company, however, has disclosed the specific details of the deal.

WHAT’S THE DIFFERENCE BETWEEN “TRANSIT” & “PEERING?”

A “peering” agreement is when two Internet infastructure companies swap data between their own networks. Sometimes, this kind of deal includes money changing hands. Other times, both companies decide to build up their own Internet capacities. Remember, Netflix doesn’t own any Internet infastructure, so it’s impossible for it to enter into a peering agreement with another company. Netflix only has money to offer. A “transit” agreement is when a media publisher, like Netflix, offers to pay a transit partner like AT&T for access to multiple ISPs. Because Netflix has struck a direct deal with the Internet service provider (Comcast), this deal isn’t considered a transit relationship. This deal is called an “interconnection agreement.”

WHY THEY STRUCK A DEAL

Netflix users had been complaining about slower streaming times in the past few months. Netflix had planned the launch of the second season of House of Cards for February 14, and they wanted to make sure users could watch this show, as well as all other content, without buffering interruptions. If you’re a Comcast customer, this is obviously great news. Verizon is also in talks with Netfliz to sign a similar deal.

THE DOWNSIDES

Critics have been saying that this deal might be a violation of “net-neutrality” regulations, which say that ISPs should treat all media served through their networks equally. Large media companies would not be allowed to pay a premium to ISPs to ensure their media is more quickly delivered than their competitor’s. If Comcast is giving Netflix Internet “fast lane” access because of this deal, then the argument could be made that it violates net neutrality. But, the terms of the deal haven’t been released. So, we don’t know whether or not Netflix is getting specialty treatment because of the deal. If it’s just a standard ISP-publisher partnership that cuts out the middleman, then it might not be an issue. It could set a precedent for future deals, which could mean greater connectivity for one user over another. Obviously, this is what net neutrality regulations aim to avoid. But, if it’s a simple partnership, it could be great for all sides, especially consumers. Netflix users could get better quality video at a lower cost.
2014-02-25T17:57:52+00:00 February 25th, 2014|Tags: , , , |