In the latest chapter in the net neutrality saga, Netflix has snared a paid interconnection agreement with AT&T in an attempt to improve video quality for AT&T's Internet subscribers, similar to Netflix's earlier deals with Comcast and Verizon, Mashable reports.
Despite a steady stream of invective between Netflix Inc. (Nasdaq: NFLX) and the service provider community, the online video company continues to add to its list of paid peering deals across the US. These direct connections with last-mile Internet providers ensure that Netflix's video programming has a clearer path to consumers, increasing the quality of service and improving the company's relationship with its customers. (See Blog Wars: Verizon, Level 3 Duke it Out.)
Paid peering agreements are only one way that Netflix optimizes online video delivery. The company also partners with transit providers such as Cogent Communications Holdings Inc. (Nasdaq: CCOI) and Level 3 Communications Inc. (NYSE: LVLT), and it works with some ISPs to install caching appliances in the last-mile network.
However, the paid interconnection agreements with ISPs have sparked controversy because they illustrate the fact that content companies can buy premium access to Internet subscribers. Opponents say these connections create Internet fast lanes, and that they hurt smaller companies that can't afford the cost of high-quality video delivery. (See Comcast's Cohen: Define Internet Fast Lanes.)
Transit providers aren't sitting out the fight either. These middle-mile network companies have repeatedly complained that ISPs aren't giving them a fair deal in peering agreements, and that service providers are even allowing specific peering points to degrade in order to draw the ire of consumers. The Federal Communications Commission (FCC) has agreed to look into the problem even though Chairman Tom Wheeler has made it clear he doesn't believe interconnection deals fall under the umbrella of net neutrality. (See Net Neutrality: Level 3 Sees Peering Progress Soon and Net Neutrality Redux? FCC Probes Peering Problems.)
Further complicating the issue is the fact that even when paid agreements have been struck directly between Netflix and ISPs, the quality of service doesn't necessarily improve right away. While Comcast Corp. (Nasdaq: CMCSA, CMCSK) subscribers have seen quality improvements since Netflix agreed to pay the service provider for a direct connection, Verizon Communications Inc. (NYSE: VZ) subscribers haven't been so lucky. This may be in part because it takes time to upgrade connections, and may also be in part because Netflix is still relying to some extent on transit partners (which are also fighting with ISPs) for delivery to Verizon customers.
According to a statement by AT&T Inc. (NYSE: T), the company reached its agreement with Netflix back in May and has been working to add interconnect capacity since that time. "We’re now beginning to turn up the connections," said a spokesperson, "a process that should be complete in the coming days."
— Mari Silbey, special to Light Reading