Light Reading

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 Group 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   >   >>
Flash Poll
From The Founder
Then pick up your axe, put on your spandex trousers and get yourself down to Light Reading's Big Telecom Event (BTE). Kerrang!!!
LRTV Custom TV
Next-Generation CCAP: Cisco cBR-8 Evolved CCAP

5|5|15   |   04:49   |   (0) comments


John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explained the innovation design of Cisco's cBR-8, the industry's first Evolved CCAP, including DOCSIS 3.1 design from ground-up, distributed CCAP with Remote PHY and path to virtualization. Cisco's cBR-8 Evolved CCAP is the platform that will last through the transitions.
LRTV Custom TV
Meeting the Demands of Bandwidth & Service Group Growth

5|1|15   |   5:35   |   (0) comments


Jorge Salinger, Comcast's Vice President of Access Architecture, explains how DOCSIS 3.1 and multi-service CCAP can meet the demands of the bandwidth and service group growth.
LRTV Custom TV
DOCSIS 3.1: Transforming Cable From Hardware-Defined Network to Software-Defined Network

4|29|15   |   03:48   |   (0) comments


John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explains how DOCSIS 3.1 can transform cable HFC network to a more agile software-defined network.
LRTV Huawei Video Resource Center
Predicting Traffic Patterns for Quality Mobile Broadband

4|29|15   |   6:45   |   (0) comments


Accessing information ubiquitously creates complexity and creates heavy traffic onto the network, especially at large-scale events like sporting events or festivals. In this video, Huawei's Mohammad Hussain speaks to experts about how to predict traffic and improve user experience during periods of heavy traffic.
Between the CEOs
Ciena CEO: The Web-Scale Revolution

4|28|15   |   10:32   |   (3) comments


Light Reading CEO and founder Steve Saunders goes head-to-head with long-time Ciena CEO Gary Smith to discuss the impact of the web-scale players, the New IP and 'white box' networks.
LRTV Documentaries
Cox Eyes Cloud-Based Home Networks

4|27|15   |   05:30   |   (0) comments


Cox's Jeff Finkelstein explains how moving services to the cloud will let cable deliver services faster and eliminate constant hardware replacements.
LRTV Documentaries
CableLabs' Clarke Updates Cable Virtualization

4|23|15   |   05:41   |   (1) comment


Former BT exec now leading CableLabs' NFV and SDN efforts explains key role of open source and updates efforts to virtualize the home network.
LRTV Interviews
Ericsson's CTO Talks Transformation: Pt. II

4|23|15   |   08:19   |   (1) comment


In the second installment of an in-depth two-part interview, Ericsson's CTO Ulf Ewaldsson talks to Light Reading CEO and founder Steve Saunders about cultural change, network slicing and technology advances.
LRTV Interviews
Ericsson's CTO Talks Transformation: Pt. I

4|23|15   |   09:27   |   (3) comments


In the first installment of an in-depth two-part interview, Ericsson's CTO Ulf Ewaldsson talks to Light Reading CEO and founder Steve Saunders about the incredible transformation underway in the communications networking industry.
LRTV Documentaries
LTE Paves the Way for the 5G Revolution

4|20|15   |   4:20   |   (0) comments


Håkan Andersson, head of 5G product strategy of the Radio Business Unit at Ericsson, discusses the role of LTE, the US and other industry verticals in building a true 5G ecosystem.
LRTV Documentaries
The 3GPP's Road to 5G Standardization

4|17|15   |   4:43   |   (0) comments


Satoshi Nagata, chairman of the 3GPP's TSG-RAN group and a manager at NTT Docomo, explains the standardization process for 5G, as well as the biggest challenges and opportunities.
LRTV Documentaries
AlcaLu CTO Makes the Case for a New 5G Air Interface

4|16|15   |   3:54   |   (0) comments


Michael Peeters, CTO of wireless at Alcatel-Lucent, explains why 5G will require a new air interface to meet its diverse performance targets.
Upcoming Live Events
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
A study run by Insights in Marketing and commissioned by Meredith shows the devices, channels and ways in which women are consuming content.
Hot Topics
No Service, No Problem: 5 Places That Want to Be Unconnected
Eryn Leavens, Copy Desk Editor, 5/1/2015
Astellia Highlights Customer Care Disconnect
Ray Le Maistre, Editor-in-chief, 4/29/2015
Cisco's Robbins to Replace Chambers as CEO
Sarah Thomas, Editorial Operations Director, 5/4/2015
Sprint Maps Out Its Next-Generation Network
Sarah Thomas, Editorial Operations Director, 5/5/2015
Cyan Says It Wasn't Starving Before Ciena Bid
Dan O'Shea, Managing Editor, 5/5/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Light Reading CEO and founder Steve Saunders goes head-to-head with long-time Ciena CEO Gary Smith to discuss the impact of the web-scale players, the New IP and 'white box' networks.
Many leading communications companies can claim to have undergone significant periods of reinvention during their histories, but none have been through more major ...
Cats with Phones
Cinco de Mayo Click Here
Cats With Phones says Happy Cinco de Mayo. Accessorize appropriately.