For much of the last year Netflix streaming problems have plagued customers of large ISPs like AT&T, Verizon and Comcast
. To hear companies like Netflix and Level 3 tell it
, the large ISPs are letting peering connectivity intentionally degrade for two reasons: 1
, to make services that compete with their own products look bad and 2
, in the hopes of forcing content companies to pay significantly higher rates for direct interconnection.
While Comcast recently was quick to strike a reasonable, long-term deal with Netflix
for interconnection (one comparable to what Netflix was already paying Cogent), most people believe that's only because Comcast wanted to appear to be on their best behavior to get regulatory approval for their Time Warner Cable merger acquisition.
As Jon Brodkin at Ars Technica points out
, Wall Street and many analysts doubt that customers on AT&T and Verizon will see resolution anytime soon, since those companies seemingly have no incentive (outside of making you happy, which doesn't appear to be a consideration) to buckle on interconnection pricing or terms:
"We think that Comcast likely sought as much as $0.01/GB transmitted, but [we] think that the companies settled for a fraction of that amount," the financial services and investment firm said in a research note on February 24. "[W]e believe that Netflix’s 33 million US streaming customers consume an average of 100GB of data per month, suggesting that Netflix’s throughput across all US broadband is 3.3 billion GB of data per month. At $0.01 per GB, Netflix would be required to pay approximately $400 million per year, over two-thirds of 2014 consensus operating profit. We think that Comcast was motivated to get a deal in place prior to its merger, but do not expect Verizon, AT&T, Charter, Cablevision, or any other US broadband provider to be similarly motivated to strike a deal."
Cablevision of course already struck a deal with Netflix to use their Open Connect CDN, but AT&T and Verizon appear eager to play a game of chicken where either Netflix pays more money, or the company's customers continue to suffer. Why? As I've explored in detail
, this is part of the incumbent telco's decade-old effort to get somebody else
to pay for their own necessary network upgrades.
Should AT&T and Verizon stay on this route, they might wind up inviting their least-favorite thing in the universe: government regulatory intervention. Level 3, Cogent, and Netflix have already urged regulators to ensure that any new neutrality rules protect companies from this kind of peering and transit shenanigans, and the FCC appears poised to at least consider the notion.