& cplSiteName &

Comcast-Netflix Peering Deal: A Game-Changer?

Mari Silbey
2/24/2014
50%
50%

The peering deal struck by Netflix and Comcast over the weekend could well prove to be a game-changer for large cable operators, telcos, and other large broadband providers in their dealings with OTT video providers.

Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Netflix Inc. (Nasdaq: NFLX) confirmed over the weekend that they have signed a new interconnection agreement to improve the quality of Netflix streams for Comcast subscribers and allow for the continued growth of Netflix traffic. The announcement touched off a wave of excitable media reports and speculation over whether the deal has implications for network neutrality, OTT video carriage, and Comcast's planned acquisition of Time Warner Cable Inc. (NYSE: TWC).

First, here are the facts. The new peering agreement does not mean that Comcast will put Netflix's caching appliance in its last-mile network the way some other providers have. Several outlets are reporting that Comcast is not supporting the Netflix appliances, and Light Reading has confirmed with a source close to the deal that this is indeed the case.

Comcast has also been adamant that the agreement does not mean that Netflix traffic will get any preferential treatment. Here's what Comcast said in its official statement:

"Working collaboratively over many months, the companies have established a more direct connection between Netflix and Comcast, similar to other networks, that's already delivering an even better user experience to consumers, while also allowing for future growth in Netflix traffic. Netflix receives no preferential network treatment under the multi-year agreement, terms of which are not being disclosed."

Because the agreement has been in the works for months, it means that Comcast's offer for Time Warner Cable was not on the table when the negotiations began. As for the terms of the deal, while Comcast and Netflix won't disclose them, many news organizations are reporting that Netflix is paying Comcast for the direct connection into its network.

Now, here is the controversy. Industry observers worry that many of the functions of the Internet are being consolidated in a handful of network and content companies, and that eliminating all of the middlemen (such as telecom backbone provider Cogent Communications Holdings Inc. (Nasdaq: CCOI)) in the delivery process will ultimately give these companies too much power. Also, because peering agreements are not within the Federal Communications Commission (FCC) 's regulatory jurisdiction (and officially not a network neutrality issue), there's concern that much of the brokering over Internet operations is happening without any oversight. (See also The Great Peering War Rages Again.)

And here's the heart of the issue. Peering agreements are based on closed-door negotiations, which means that nobody gets to see how the deals are done. Many consider the agreement between Comcast and Netflix to be a win for everyone. Comcast gets paid, Netflix gets an acceptable deal for traffic delivery, and consumers get higher quality video delivery.

However, there is no way of knowing what the implications are for these types of deals in the future, when the players and situations will be different. And without a transparent view of the process, there's no way to know if the industry needs to put new checks and balances in place.

— Mari Silbey, special to Light Reading

(15)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 2   >   >>
pcharles09
50%
50%
pcharles09,
User Rank: Light Beer
2/26/2014 | 9:01:14 PM
Re: The problem
Only $15B...?

In all reality, that sounds like enough of a barrier to entry.
brookseven
50%
50%
brookseven,
User Rank: Light Sabre
2/26/2014 | 2:09:17 PM
Re: The problem
Community networks are a 100 year old idea.  Try the Independent Operating Companies (many of the smaller of which are muni owned).

 

seven

 
cwgservices
50%
50%
cwgservices,
User Rank: Light Beer
2/26/2014 | 11:38:56 AM
Re: The problem
I think municipal and community networks are an idea whose time has come. Check out all the activity in public-access small cell deployments as discussed here on Light Reading. Networks of interconnected networks can provide resilency and high performance, and will increase the options available to consumers.
sam masud
50%
50%
sam masud,
User Rank: Light Sabre
2/25/2014 | 2:11:04 PM
Re: The problem
Thanks for suggestion (a)--I've been saying for quite some time that municipal networks aren't all that crazy an idea.
msilbey
50%
50%
msilbey,
User Rank: Blogger
2/25/2014 | 9:39:48 AM
Re: The problem
gconnery- You are exactly right. Frankly, Netflix only became the success it is because of pitch-perfect timing. It grew big enough quietly enough that the cable/telco companies didn't pay enough attention until Netflix already had the power of a massive audience. I don't see how a new start-up could squeak in anymore given everything that's happening on the distribution side of the market. 
gconnery
50%
50%
gconnery,
User Rank: Light Sabre
2/25/2014 | 3:07:43 AM
Re: The problem
We could:


a) allow local communities to build their own networks, and in particular make this legally nationally so we can stop the stupid cable companies from lobbying to block municipal networks in each state

b) we can require that the wire be installed by a separate company, which then charges all commers for access.  those can then sell ISP services.  yes this is how they would do it in Europe.  so?


c) we can hope and pray that Google fiber provides a real alternative over time

d) I guess we could do things to ensure that wireless eventually develops into a real alternative.  honestly though, this seems a bit far fetched right now, with the ridiculous data caps and the networks already getting bogged down by current LTE network penetration using only cell phones.  for the moment I'd say this isn't possible.

Other options?  Not sure there are any.

The issue with Comcast and Netflix is really not about Netflix.  Its about the next new disruptive service that won't exist because it now can't compete with Netflix which has already reached a scale where it can pay Comcast.  The next disrupter won't be able to.  There was a great post about this here:

http://avc.com/a_vc/2014/01/vc-pitches-in-a-year-or-two.html
mendyk
100%
0%
mendyk,
User Rank: Light Sabre
2/25/2014 | 12:55:44 AM
Money in the middle
Isn't eliminating the middle man (aka disintermediation) what effective disruption is all about? And yes, this is a partially loaded question.
brookseven
0%
100%
brookseven,
User Rank: Light Sabre
2/24/2014 | 8:28:03 PM
Re: The problem
Nobody has closed the door to competition.

Just pony up your own $15B and build your own network.  Anybody can!

seven

 
pcharles09
50%
50%
pcharles09,
User Rank: Light Beer
2/24/2014 | 8:11:52 PM
Re: The problem
That's what gets me. How do these lobbyists & campaign donors get to choose what we, the people want, & get away with it. I mean, I know money talks but when it comes to democracy & capitalism, I thought it's supposed to the the consumer that votes with their hard-earner dollars, not providers closing doors to competition... and then it being OK...?
KBode
100%
0%
KBode,
User Rank: Light Sabre
2/24/2014 | 6:06:52 PM
Re: The problem
I think the real problem (as Carol aptly hints at) is that the only way to truly get uniform broadband competition in place -- and improved networks to low ROI areas -- requires an independent regulator with the guts to do things that the incumbent operators won't approve of. We don't have that. We have a Congress and political culture that snaps its head at the slightest hyperbole, a total disdain of spending money on infrastructure (war and military investment is fine, though), and a general inability to sever regulation from campaign contributions.

Until we learn to fix some of these things, we're going to be mediocre at connectivity, and especially the kind of competition that prompts connectivity to flourish. I just don't think there's a route around this.
Page 1 / 2   >   >>
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, August 3, 1:00PM EDT
The Central Office Re-Architected as a Data Center
Guru Parulkar, Executive Director, Open Networking Research Center, Open Networking Lab
UPCOMING COURSE SCHEDULE
Wednesday, August 10, 1:00PM EDT
Telcos & Open Source 101
Phil Robb, Senior Technical Director, OpenDaylight
Friday, August 12, 1:00PM EDT
The Role of Open Source in NFV
Jim Fagan, Director, Cloud Practice, Telstra
Wednesday, August 17, 1:00PM EDT
Using Open Source for Data Centers and Cloud Services
Roz Roseboro, Senior Analyst, Heavy Reading
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
Women in Comms Introduction Videos
Fujitsu Sales Leader Shares Lessons Learned

7|27|16   |   5:12   |   (0) comments


As Fujitsu's only female sales leader, Annie Bogue knows the importance of asking for what you want, being flexible (she's been relocated five times), keeping a meticulous calendar, 'leaning in,' working harder than everyone else around you, being aware and more.
Telecom Innovators Video Showcase
VeEX Test & Measurement Solutions

7|25|16   |   08:57   |   (0) comments


Cyrille Morelle, president and CEO of VeEX Inc., talks test and measurement with Light Reading's Steve Saunders at BCE 2016. This includes innovative products such as VeSion Cloud-Based platform for network monitoring; MTTplus Modular Test platform for Access, Business, Carrier Ethernet, Transport and Core services; and OPX-BOX+ for Fiber Optics.
LRTV Custom TV
VeEX: Live From BCE 2016

7|25|16   |   03:20   |   (0) comments


VeEX's Senior Director of Business Development, Perry Romano, explains how VeEX provides tools to help install, maintain, monitor and manage network infrastructure efficiently and effectively. The portfolio of products on display include the RXT-6000, MTTplus and TX300s.
LRTV Custom TV
Real-Time Telemetry & Analytics for Intelligent SDN Orchestration

7|25|16   |   03:09   |   (0) comments


Packet Design CEO Scott Sherwood discusses how real-time network telemetry and analytics are enabling a new breed of SDN orchestration applications.
From the Founder
The Russo Report: Driving Disruption

7|25|16   |   07:44   |   (0) comments


In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
LRTV Custom TV
NetScout: Maximizing Enterprise Cloud for Digital Transformation

7|20|16   |   04:53   |   (0) comments


Light Reading Editor Mitch Wagner talks to NetScout CMO Jim McNiel about maximizing the benefits of enterprise cloud and digital transformation while minimizing potential pitfalls with a proper monitoring and instrumentation strategy.
Women in Comms Introduction Videos
Ciena's VP Offers a Career Crash Course

7|20|16   |   4:14   |   (2) comments


How did Ciena's Vice President of Sales, Angela Finn, carve out her career path? Simple, she tells WiC. She stayed true to her company, customers and principles. She shares her advice for women on how to be authentic and credible, as well as for companies that want to make a real change to their culture and practices.
LRTV Custom TV
NFV in 2016: Part 2 – Climbing the Virtualization Maturity Curve

7|19|16   |   06:56   |   (0) comments


Many of the initial use case implementations are single-vendor and self-contained. The industry is still climbing the virtualization maturity curve, needing further clarity and stability in the NFV infrastructure (NFVi) and greater availability and choice of virtualized network functions (VNFs). Interoperability between NFVis and VNFs from different vendors ...
Telecom Innovators Video Showcase
Versa Networks' Kumar Mehta on SD-WAN Managed Services

7|19|16   |     |   (0) comments


In Silicon Valley, Steve Saunders sits down with Versa's Kumar Mehta for an interview focused on why service providers are building SD-WAN managed services, and how Versa's telco customers are innovating.
LRTV Custom TV
Juniper Networks & The Evolution of NFV

7|19|16   |   06:01   |   (0) comments


Senior Juniper Networks executives talk to Light Reading Founder & CEO Steve Saunders about NFV developments and the recent independent evaluation by test lab EANTC of Juniper's Cloud CPE solution.
LRTV Interviews
CenturyLink Goes Beyond Managed WiFi

7|19|16   |     |   (0) comments


CenturyLink's managed WiFi allows enterprises, such as retailers and resorts, to track guest WiFi usage in order to help them better communicate with customers.
LRTV Interviews
AT&T Launches Network Functions on Demand

7|17|16   |   05:26   |   (0) comments


Roman Pacewicz, Senior Vice President, Offer Management & Service Integration, AT&T Business Solutions, discusses the operator's launch of its Network Functions on Demand service.
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
September 27, 2016, Philadelphia, PA
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 6-8, 2016,
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Five of the Top 10 most targeted countries in Check Point Software Technologies' global Malware & Threat Index for Q1 2016 are in Africa.
Hot Topics
Verizon Sports Big Plans for Yahoo
Alan Breznick, Cable/Video Practice Leader, Light Reading, 7/26/2016
Yahoo Signing Off in $4.83B Sale to Verizon
Mari Silbey, Senior Editor, Cable/Video, 7/25/2016
Is Dish Going Down the Drain?
Alan Breznick, Cable/Video Practice Leader, Light Reading, 7/21/2016
Facebook Gets Its Drone On
Ray Le Maistre, Editor-in-chief, 7/22/2016
Ericsson Ejects CEO Vestberg
Ray Le Maistre, Editor-in-chief, 7/25/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
There's no question that, come 2020, 5G technology will turn the world's conception of what mobile networking is on its head. Within the world of 5G development, Dr. ...
I've enjoyed interviewing many interesting people since I rejoined Light Reading, but William A. "Bill" Owens certainly takes the biscuit, as we say where I come from.
Animals with Phones
Live Digital Audio

Our world has evolved through innovation from the Industrial Revolution of the 1740s to the information age, and it is now entering the Fourth Industrial Revolution, driven by technology. Technology is driving a paradigm shift in the way digital solutions deliver a connected world, changing the way we live, communicate and provide solutions. It can have a powerful impact on how we tackle some of the world’s most pressing problems. In this radio show, Caroline Dowling, President of Communications Infrastructure & Enterprise Computing at Flex, will join Women in Comms Director Sarah Thomas to discuss the impact technology has on society and how it can be a game-changer across the globe; improving lives and creating a smarter world. Dowling, a Cork, Ireland, native and graduate of Harvard Business School's Advanced Management Program, will also discuss her experience managing an international team focused on innovation in an age of high-speed change.