Thursday, February 27, 2014

New Netflix / Comcast Deal Sounds Good, but is it Bad for Consumers?

Netflix has struck a deal with Comcast to streamline the middleman pipeline that directs traffic between Netflix' servers and Comcast's subscribers, a move that should clear up bottlenecks and reduced speeds at prime time.  During peak hours, as much as 30 percent of internet traffic can be taken up by Netflix content streaming, so any decision that manages that traffic will be noticed immediately by subscribers.

But Comcast is in the process of approval for its takeover of Time Warner Cable, crating a near-monopoly on cable and internet to American consumers.  So the deal with Netflix is described as "water in the basement" before a coming flood of similar agreements between giant content providers and internet service providers.  This could choke competition and make sure that new startups will find it hard to compete on a level playing field.

Hunter Communications Original News Source:
The New York Times

Link to article:

Excerpt: "Comcast, the country’s largest cable and broadband provider, and Netflix, the giant television and movie streaming service, announced an agreement Sunday in which Netflix will pay Comcast for faster and more reliable access to Comcast’s subscribers.

The deal is a milestone in the history of the Internet, where content providers like Netflix generally have not had to pay for access to the customers of a broadband provider.

But the growing power of broadband companies like Comcast, Verizon and AT&T has given those companies increased leverage over sites whose traffic gobbles up chunks of a network’s capacity. Netflix is one of those sites, accounting for nearly 30 percent of all Internet traffic at peak hours.

The agreement comes just 10 days after Comcast agreed to buy Time Warner Cable for $45 billion, an acquisition that would make Comcast the cable provider to nearly one-third of American homes and the high-speed Internet company for close to 40 percent. Federal regulators are expected to scrutinize whether that deal would thwart competition among cable and Internet providers.

It is also unclear whether the Comcast-Netflix deal violates the principles of what is known as net neutrality — where all content providers have equal and free access to consumers. People close to the deal characterize it as a common arrangement. Content companies frequently pay a middleman to carry traffic to a broadband provider, which then moves through its pipes and into a consumer’s home.

In a news release announcing the deal, the companies said, “Netflix receives no preferential network treatment under the multiyear agreement.” Details were not disclosed, but a person close to the companies said it involved annual payments of several million dollars.

Others, including Tim Wu, a Columbia Law School professor and advocate for net neutrality, said the interconnection agreement between Comcast and Netflix was one of the first such arrangements where a broadband provider like Comcast has extracted payment to send specific content through the “on ramp” to its network.

'This is the water in the basement for the Internet industry,' Mr. Wu said, the first in what could be a flood of such arrangements. 'I think it is going to be bad for consumers,' he added, because such costs are often passed through to the customer.

One fear is that if such deals become common, only the wealthiest content companies will be able to afford to pay for them, which could stifle the next Netflix from ever getting off the ground.

The agreement also follows a January ruling from a federal appeals court that struck down the Federal Communications Commission’s net neutrality rules, saying the agency overstepped its authority. This type of deal between Comcast and Netflix might have been forbidden under a liberal reading of the F.C.C.’s rules.

The announcement on Sunday confirmed reports that had trickled out late last week, as close watchers of Internet traffic began to detect a more direct Internet path of Netflix videos to Comcast customers. In recent months, Netflix had reported that delivery speed of its content to Comcast subscribers had declined by more than 25 percent, resulting in frequent interruptions and delays for customers trying to stream television shows and movies delivered through Netflix. Customers of other providers, including Verizon, also reported delays."

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