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What The Comcast-Netflix Deal Means For Consumers

Feb 24 2014, 10:16am CST | by

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What The Comcast-Netflix Deal Means For Consumers

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What The Comcast-Netflix Deal Means For Consumers

After last month’s appeal court ruling striking down the FCC's net neutrality rules, yesterday’s deal between Comcast and Netflix has come in for far more scrutiny than it might have in the past.

Under the agreement, Netflix will pay Comcast an undisclosed sum to connect directly to Netflix’s servers. This enables Netflix to cut out the middlemen – content delivery networks such as Cogent Communications and Level 3 – and eliminate existing bottlenecks.

It’s important to note that the deal is in no way a response to the appeal court ruling – indeed, Comcast is specifically barred from trying to take advantage of it. It’s bound by a consent decree to abide by the principle of net neutrality until the end of 2017, following its acquisition of NBC Universal in 2011. In any case, network neutrality has only ever applied to the “last mile” connection into customers’ homes, with so-called peering arrangements such as this specifically exempted.

Nevertheless, the deal does in many ways represent a method of side-stepping network neutrality as it’s currently envisaged. The end result, after all, is that a content provider is paying an ISP to make sure its traffic gets the minimum of disruption. So does this deal represent the thin end of the wedge, and what will it mean for consumers?

What it means for Comcast customers

First, the deal should mean an improvement in quality. Throughput should increase and, in theory, consumers should get fewer headaches when watching House of Cards.

In the last four months, Netflix’s ISP speed index has shown a decline in streaming speeds of more than a quarter, with users reporting a increase in judders and hiccups.

The problem is congestion – with Netflix now accounting for an astonishing 30 percent of internet traffic, Comcast’s interconnection points were overloaded. The new deal relieves this bottleneck.

Unfortunately, that’s not quite all there is to it, and customers can’t all expect to see a transformation when it comes to performance. In practice, there are quite a number of potential routes from Comcast’s servers to the home, and local issues and peak demand times will have an effect.

What it means for costs

There’s no reason to think that the deal will increase prices for Comcast customers. Whatever Netflix is paying Comcast, it’s presumably no more than it’s already paying for third party content delivery networks. It’s not in dispute that improvements needed to be made; and however this was achieved, the costs would have been passed on to customers.

What it means for customers of other ISPs

The Netflix-Comcast deal does, of course set a precedent. And Comcast isn’t the only ISP whose customers have been complaining of poor quality when viewing Netflix video. Verizon users, too, have seen performance fall in recent months, and it’s more than possible that the ISP may try to negotiate a similar deal to improve performance for its users.

Meanwhile, many other ISPs handle Netflix traffic through the comnpany’s Open Connect program, which operates as an alternative content delivery network. Now, though, it’s possible that these ISPs will start to agitate for similar deals to Comcast’s.

What it means long term

The deal means that while Netflix content gets a free pass, other internet data still has to pass through the interconnection bottleneck – a bottleneck that Comcast now has less of an incentive to deal with.

There are fears that if such agreements become the norm this could damage the chances of start-up content companies, reducing competition and limiting the options for consumers. This danger will need monitoring carefully – as if regulators don’t already have enough on their plate.

Source: Forbes


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