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YukonHawk

join:2001-01-07
Patterson, NY
Reviews:
·Comcast

2 edits

[Business] Looks like Netflix is paying up to improve signals Source WSJ.

Mod...Please feel free to move or merge. Thanks..Paul......Here's the whole story...

Netflix Agrees to Pay Comcast to End Traffic Jam
Deal Ends Standoff Over Streaming, Would Give Netflix Direct Access to Comcast Systems

By
Shalini Ramachandran
connect
Updated Feb. 23, 2014 12:16 p.m. ET

Netflix Inc. NFLX -0.63% has agreed to pay Comcast Corp. CMCSA -1.37% to ensure Netflix movies and TV shows stream smoothly to Comcast customers, a landmark agreement that could set a precedent for Netflix's dealings with other broadband providers, people familiar with the situation said.

In exchange for payment, Netflix will get direct access to Comcast's broadband network, the people said. The multiyear deal comes just 10 days after Comcast agreed to buy Time Warner Cable Inc., TWC -0.79% which if approved would establish Comcast as by far the dominant provider of broadband in the U.S., serving 30 million households.

For months Netflix and Comcast have been in a standoff over Netflix's request that Comcast connect to Netflix's video distribution network free of charge. But Comcast wanted to be paid for connecting to Netflix's specialized servers due to the heavy load of traffic Netflix would send into the cable operator's network. Under the deal, Netflix won't be able to place its servers inside Comcast's data centers, which Netflix had wanted. Instead, Comcast will connect to Netflix's servers at data centers operated by other companies.

Netflix Chief Executive Reed Hastings decided to strike the deal after Netflix saw a deterioration in streaming speeds for Comcast subscribers. According to Netflix data published in January, the average speeds of Netflix's prime-time streams to Comcast subscribers had dropped 27% since October. Mr. Hastings didn't want streaming speeds to deteriorate further and become a bigger issue for customers, the people said.

During this period, Netflix was using Internet middlemen Cogent Communications CCOI -0.10% as a "primary" route into Comcast, a person familiar with the matter has said. That connection was starting to become overwhelmed with Netflix traffic, congesting traffic and leading to slower Netflix streams for Comcast Internet users, people familiar with the matter said.

At the same time, Comcast presented Netflix with more attractive deal terms than the operator had been offering, the people said. The deal spans several years. Netflix was aiming for a long-term deal to make sure its projected traffic growth wouldn't put it at a disadvantage, one of the people said. The connection is a so-called "paid peering" deal, which connects Netflix's network to Comcast's directly. Netflix was previously using several middlemen to access Comcast's network.

Mr. Hastings and Comcast CEO Brian Roberts have met on-and-off in recent months to discuss a possible deal and the two came to a framework for an agreement at a meeting at the Consumer Electronics Show in January. Final details were worked out over the past two days, one of the people said.

The deal could force Netflix's hand in its standoff with other major U.S. broadband providers, including AT&T Inc., T -1.15% Verizon Communications Inc. VZ -1.77% and Time Warner Cable Inc.—all of whom have also refused to connect with Netflix's servers without compensation. Netflix's streams with Verizon in particular have gotten worse in recent months.

Netflix has little room to pay more to transmit its TV shows and movies. In a February regulatory filing, Netflix said that if providers don't interconnect with its servers, its ability to deliver streaming video, its business and operating results could be "adversely affected" due to increased costs.

The deal is the latest sign that broadband providers are gaining leverage in their dealings with content companies. Over the past several years, technology companies like Microsoft Corp. MSFT +0.61% , Facebook Inc. FB -1.49% and Google Inc. GOOG -0.03% have also started paying major broadband providers for direct connections to their networks that would provide faster and smoother access.

Write to Shalini Ramachandran at shalini.ramachandran@wsj.com


train_wreck

join:2013-10-04
Antioch, TN
Reviews:
·Comcast
yeah, this'll probably open the floodgates for incumbent ISPs to start charging all sorts of other companies for "premium" access to its customers (and by "premium", i might mean "usable"), particularly if those companies have competing interests with the ISP conglomerates.

oh, and i wouldn't be surprised to see netflix subscriber rates get hiked as an unfortunate "side-effect" of this.


YukonHawk

join:2001-01-07
Patterson, NY
Reviews:
·Comcast
said by train_wreck:

oh, and i wouldn't be surprised to see netflix subscriber rates get hiked as an unfortunate "side-effect" of this.

You took the words right out of my mouth..Rates hikes...here they come. :-(


train_wreck

join:2013-10-04
Antioch, TN
yep, when King Kong and Godzilla battle it out, it's the little guys (us) who get squashed. passing the "savings" along to us.


elkido122

join:2011-02-23
Folsom, CA
So if we want to watch nexflix now Comcast will charge us or no??


jlivingood
Premium,VIP
join:2007-10-28
Philadelphia, PA
kudos:2
reply to YukonHawk


tshirt
Premium,MVM
join:2004-07-11
Snohomish, WA
kudos:5
Reviews:
·Comcast

1 recommendation

reply to elkido122
said by elkido122:

So if we want to watch nexflix now Comcast will charge us or no??

No, it means comcast won't need to raise rates to pay for Netflix customer traffic.
Netflix may or may not need to charge more, but it will only be Netflix customers paying for THEIR Netflix traffic, as it should be.
Expand your moderator at work


tshirt
Premium,MVM
join:2004-07-11
Snohomish, WA
kudos:5
Reviews:
·Comcast
reply to train_wreck

Re: [Business] Looks like Netflix is paying up to improve signals Source WSJ.

said by train_wreck:

yep, when King Kong and Godzilla battle it out, it's the little guys (us) who get squashed. passing the "savings" along to us.

End users were always going to pay the cost, it was really about at which end you paid, which effected which end users paid.


train_wreck

join:2013-10-04
Antioch, TN
Reviews:
·Comcast
said by tshirt:

End users were always going to pay the cost, it was really about at which end you paid, which effected which end users paid.

sure. but say Netflix raises rates. How do you think that makes netflix users on Charter/Bright House/any other ISP feel? They're having to pay for this Comcast deal when they have nothing to do with Comcast. Unless Netflix would be intelligent enough to only raise rates for Comcast customers singularly.

Keep in mind we're speaking in hypotheticals, no rate hikes have been announced just yet

AVonGauss
Premium
join:2007-11-01
Boynton Beach, FL

1 recommendation

reply to train_wreck
said by train_wreck:

yeah, this'll probably open the floodgates for incumbent ISPs to start charging all sorts of other companies for "premium" access to its customers (and by "premium", i might mean "usable"), particularly if those companies have competing interests with the ISP conglomerates.

oh, and i wouldn't be surprised to see netflix subscriber rates get hiked as an unfortunate "side-effect" of this.

The amount of money NetFlix pays anyone for transit is insignificant when compared to content I would imagine.

What this really means, in the long term, is rather than paying a third party (i.e. L3, Cogent) fees for transit, they will be paying the ISP directly. Depending on NetFlix's network and negotiation skills, it could in the long term save NetFlix quite a bit of cash.

This isn't exactly a new or unique situation, any Internet content provider once reaching a certain size has to make the transition.

AVonGauss
Premium
join:2007-11-01
Boynton Beach, FL
reply to train_wreck
said by train_wreck:

Keep in mind we're speaking in hypotheticals

Not really so hypothetical, NetFlix for months now has been giving indications they are going to be changing their rate structure.


train_wreck

join:2013-10-04
Antioch, TN
Reviews:
·Comcast
said by AVonGauss:

Not really so hypothetical, NetFlix for months now has been giving indications they are going to be changing their rate structure.

that's why i italicized "just"

and to your point of Netflix now paying the ISPs, it seems to me that they'll now be paying the ISP in addition to the CDNs. Which, as far as i've heard, is somewhat new. I can't remember ever hearing of an internet content company directly paying an ISP for improved access, but i'd be curious to know if/where that's happened.

Madtown
Premium
join:2008-04-26
Madera, CA
reply to YukonHawk
How long will this take to be in effect?


camper
Premium
join:2010-03-21
Bethel, CT
kudos:1
Reviews:
·Comcast
reply to tshirt
said by tshirt:

No, it means comcast won't need to raise rates to pay for Netflix customer traffic.

 
Comcast never needed Netflix traffic as an excuse to raise rates.

AVonGauss
Premium
join:2007-11-01
Boynton Beach, FL

1 edit

3 recommendations

reply to train_wreck
They aren't really paying for "improved access", what's changing is NetFlix is now paying the ISP directly for transit rather than a third party. By eliminating one more person in the loop, the cost for the same usage should (theoretically) go down. The CDN aspects is a value added service on top of the transit costs, NetFlix has already started (2012) the process of building its own CDN which should also dramatically save them money especially in the long term.

This really isn't a lot different than what Google, Facebook, Microsoft, Apple and slew of other companies have had to go through as their usage increased. What is different about NetFlix is they don't have the same processing requirements that a Facebook has and hence haven't gone down the path of building their own datacenters so the transit portion of the equation is much easier to see.

The irony is to those claiming this changes the way the Internet works or is an encroachment on "net neutrality" - its exactly the opposite, it keeps the Internet working the way it has been. The change would have been if the large ISPs took NetFlix up on the Open Connect deal, which would have definitely encroached upon net neutrality and changed the way the Internet does business - not to mention make it harder for a NetFlix competitor to compete.

Comcast is not likely to be nominated for sainthood anytime soon, but I really don't think they were doing anything particularly devious in regard to this issue. If we look back at when the massive amount of reports started coming in, it directly correlates to when NetFlix started opening up its "Super HD" offering to all users and thus significantly increasing the amount of traffic they were generating.

iansltx

join:2007-02-19
Austin, TX
kudos:2
Reviews:
·Time Warner Cable
·Verizon Online DSL
·Comcast

1 recommendation

reply to train_wreck
A bunch of data centers peer (paid) directly with Comcast. SoftLayer is probably the biggest one that has a variety of customers. As mentioned in the article, Facebook, Google and Microsoft also pay Comcast for peering.

I wouldn't be surprised if Netflix is paying Comcast slightly more per megabit than it did to Cogent, but not appreciably more. But the overall bandwidth bill will be higher because now that the routes are uncongested people will stream at higher definition than before, and stream more because they don't get frustrated due to buffering.

The bigger issue for Netflix here is that now, if they want to reach Comcast customers with any sort of quality of service, they really have to pay Comcast directly for the privilege. No competitive bandwidth market anymore...which kind of breaks the idea of the Internet as a network of networks on relatively equal footing at the large end of the spectrum. Technically you can put your website on whatever host you want, but above a certain bandwidth those hosts that don't pay Comcast to play won't have good connectivity during peak periods, even if both sides of the interconnection point are otherwise uncongested.

Granted, Comcast provides value to some hosts that direct-connect, such that those hosts don't have to haul bits over miles on their own, or pay someone else to do it. But when there's no competition for getting bits reliably to the largest concentration of broadband subscriber in the US, there's a lot that that provider can do to abuse its market position.


tshirt
Premium,MVM
join:2004-07-11
Snohomish, WA
kudos:5
reply to train_wreck
those on network caches are similar and had their own cost which came from some Comcast customers fees too.
I'm not sure how much if any Netflix will raise their rates but they won't be keeping as much of it as they were hoping to before.

iansltx

join:2007-02-19
Austin, TX
kudos:2
Reviews:
·Time Warner Cable
·Verizon Online DSL
·Comcast
reply to AVonGauss
Akamai operates its own "edge caches" deep within ISP networks. That isn't a violation of Net Neutrality. Why are you saying that Netflix OpenConnect is such a violation? It's not like OpenConnect enabled ISPs are prioritizing traffic from Netflix's peering connections or collocated boxes over other traffic, more than what standard TCP does when you decrease the latency between two points.


tshirt
Premium,MVM
join:2004-07-11
Snohomish, WA
kudos:5
Reviews:
·Comcast
reply to iansltx
Click for full size
said by iansltx:

A bunch of data centers peer (paid) directly with Comcast. SoftLayer is probably the biggest one that has a variety of customers. As mentioned in the article, Facebook, Google and Microsoft also pay Comcast for peering

Sometimes it's as simple as crossing the street

AVonGauss
Premium
join:2007-11-01
Boynton Beach, FL
reply to iansltx
said by iansltx:

Akamai operates its own "edge caches" deep within ISP networks. That isn't a violation of Net Neutrality. Why are you saying that Netflix OpenConnect is such a violation?

They're not likely as deep as you think they are and I believe they have entered in to a business relationship with those ISPs to provide that service - not unlike NetFlix has now done with Comcast.

The word I used was "encroached" not "violation".


train_wreck

join:2013-10-04
Antioch, TN
Reviews:
·Comcast

1 recommendation

reply to AVonGauss
said by AVonGauss:

Comcast is likely to be nominated for sainthood anytime soon, but I really don't think they were doing anything particularly devious in regard to this issue. If we look back at when the massive amount of reports started coming in, it directly correlates to when NetFlix started opening up its "Super HD" offering to all users and thus significantly increasing the amount of traffic they were generating.

I suppose that Neflix, being at times 1/3 of all internet traffic, is quite the special case here. And I didn't realize Facebook, Google et al. were paying Comcast directly; i'd always assumed they paid their CDN host, who then peered with Comcast.

Very interesting stuff to an outsider like me.

AVonGauss
Premium
join:2007-11-01
Boynton Beach, FL
said by train_wreck:

And I didn't realize Facebook, Google et al. were paying Comcast directly; i'd always assumed they paid their CDN host, who then peered with Comcast.

I'm not sure if Facebook, Google or anyone else is paying Comcast (or any other ISP) money directly, though if I had to guess I would think its likely - following the money isn't as easy as one would think. For POP locations, a third party data center is likely used and they may include Comcast as part of their mix. The one given fact is you'll pay on both ends of the pipe.


telcodad
Premium
join:2011-09-16
Lincroft, NJ
kudos:15

2 edits
reply to YukonHawk
FYI - An article on the MCN site this afternoon about this:

Comcast, Netflix Forge a Stronger Streaming Connection
Netflix Said To Be Paying Comcast For Deeper, More Direct Connection To MSO's Broadband Subs

By Jeff Baumgartner, Multichannel News - February 23, 2014
»www.multichannel.com/distributio···n/148473

EDIT: The press release issued by Comcast and Netflix:

Comcast And Netflix Team Up To Provide Customers Excellent User Experience
Comcast/Netflix Press Release, PR Newswire - February 23, 2014
»www.prnewswire.com/news-releases···521.html


tshirt
Premium,MVM
join:2004-07-11
Snohomish, WA
kudos:5
Reviews:
·Comcast

1 edit

1 recommendation

reply to camper
said by camper:

Comcast never needed Netflix traffic as an excuse to raise rates.

My Comcast internet service is about the same price (after inflation) as it was10 years ago when I first signed up and is at 50/10 vs the 3/1 speed offered then.
I wish I could say the same about gas prices or a leg of lamb.


jlivingood
Premium,VIP
join:2007-10-28
Philadelphia, PA
kudos:2
reply to AVonGauss
said by AVonGauss:

This isn't exactly a new or unique situation, any Internet content provider once reaching a certain size has to make the transition.

+1
--
JL
Comcast


connections

@pppoe.ca
reply to AVonGauss
said by AVonGauss:

This isn't exactly a new or unique situation, any Internet content provider once reaching a certain size has to make the transition.

Extortion is extortion no matter what the size of the company involved. Just because its already happened doesn't make it right.


NormanS
I gave her time to steal my mind away
Premium,MVM
join:2001-02-14
San Jose, CA
kudos:12
Reviews:
·SONIC.NET
·Pacific Bell - SBC
reply to tshirt
said by tshirt:

Netflix may or may not need to charge more, but it will only be Netflix customers paying for THEIR Netflix traffic, as it should be.

So will you give me a kudo, or three, for picking up your Netflix tab?
--
Norman
~Oh Lord, why have you come
~To Konnyu, with the Lion and the Drum


davidc502

join:2002-03-06
Mount Juliet, TN
kudos:1
Reviews:
·TDS
reply to YukonHawk
With Netflix entering this deal with Comcast, they will ultimately have to pay the rest of the ISP's which will ultimately raise rates (Netflix Hulu etc rates), and raise the Executive salaries in kind (Comcast Execs). Who knows, maybe they will build more sky scrapers in various cities.

»abclocal.go.com/wpvi/story?secti···=9394677

The government needs to step in and break this company up like they did with Bell back in the 80's. If not that, at least keep the Time Warner merger from happening.

Netflix was battling Verizon, so I wonder why they gave in to Comcast.


NormanS
I gave her time to steal my mind away
Premium,MVM
join:2001-02-14
San Jose, CA
kudos:12
Reviews:
·SONIC.NET
·Pacific Bell - SBC
said by davidc502:

Netflix was battling Verizon, so I wonder why they gave in to Comcast.

Comcast didn't demand as much as Verizon wants?
--
Norman
~Oh Lord, why have you come
~To Konnyu, with the Lion and the Drum