Netflix Agrees To Pay Comcast To End Slowdown

Data released by Netflix shows the steep drop in connection speeds for both Comcast and Verizon in recent months.

Data released by Netflix shows the steep drop in connection speeds for both Comcast and Verizon in recent months.

For the last several months, Comcast Internet customers have complained about a drop in quality of the Netflix streams being delivered to their homes, and Netflix’s own data showed a massive decline in connection speeds starting in October. But today, the two companies announced they have reached a “mutually beneficial” agreement that will hopefully turn that trend around.

Much like Netflix’s ongoing standoff with Verizon FiOS, the drop in speeds wasn’t an issue of the ISP throttling or blocking service to Netflix. Rather, the ISPs were allowing for Netflix traffic to bottleneck at what’s known as “peering ports,” the connection between Netflix’s bandwidth provider and the ISPs.

Until recently, if peering ports became congested with downstream traffic, it was common practice for an ISP to temporarily open up new ports to maintain the flow of data. This was not a business arrangement; just something that had been done as a courtesy. ISPs would expect the bandwidth companies to do the same if there was a spike in upstream traffic. However, there is virtually no upstream traffic with Netflix, so the Comcasts and Verizons of the world claimed they were being taken advantage of.

Today’s announcement, which doesn’t specify any financial terms, says that Netflix and Comcast have “established a more direct connection between Netflix and Comcast.”

The Wall Street Journal reports that Netflix wanted to put servers inside of Comcast data centers, but the Kabletown folks balked at the idea. In the end, Comcast will connect to the streaming servers at data centers operated by third parties.

Comcast claims that the arrangement will not just alleviate the current Netflix logjam but will allow the streaming video company to continue growing. That’s a major concern with ultra-HD 4K TVs gradually making their way into U.S. homes. As these become more common, and 4K owners demand more streaming content, Netflix will need reliable, higher-speed connections to subscribers’ homes.

The question is what sort of precedent this Netflix/Comcast deal sets for the rest of the marketplace. By making this deal with the nation’s largest cable company (which is trying to become even larger with its plan to purchase Time Warner Cable), Netflix will likely need to reach a similar paid-peering arrangement with Verizon, TWC, and others.

If a company wants to get into the streaming video business, paid-peering would now have to be considered part of the price for entry into the marketplace. Which is another reason one should be concerned about the proposed Comcast/TWC merger. By combining the country’s two largest ISPs, you’d create a single entity that could effectively set all the standards and rates for paid-peering arrangements; if a company wants to reach the home audience, Comcast would determine how much it will cost.

As we’ve pointed out before, the issue of peering was not covered by the recently gutted net neutrality rules. Those guidelines only dealt with whether an ISP deliberately blocked/throttled or unfairly prioritized traffic to a website. The congestion at peering ports occurs further upstream and is a matter of capacity.

To use a foodservice analogy. Imagine a restaurant has an incredibly popular dish that everyone wants to order. The kitchen has no problem meeting that demand, but orders aren’t getting to diners’ tables in time.

If that slowdown is because the waiters decide customers shouldn’t get that particular menu item, or that there are other menu items that should be delivered in a more timely manner — that’s a net neutrality issue.

But if that awesome food is slow to the table because there simply aren’t enough waiters and no off-work waiters are willing to come in for a few hours to help out because it’s their night off — that’s a peering issue.

Even with the recent appeals court ruling that neutered net neutrality, Comcast is still required to abide by those guidelines through 2018 as part of the terms of its recent merger with NBC Universal.

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