Netflix Cracks Top 10 MSO

In the latest broadband breakthrough for Netflix, the online giant has struck a deal with Suddenlink Communications to stream to the MSO's cable set-top boxes.

Suddenlink Communications , the seventh largest US MSO with about 1.2 million video subscribers, thus becomes the biggest North American cable provider to come to terms with Netflix Inc. (Nasdaq: NFLX) and potentially transform it from a powerful broadband video rival to a budding partner. Less than two weeks ago, three smaller cable operators and overbuilders -- Atlantic Broadband , Grande Communications , and RCN Corp. -- broke the ice by signing the industry's first carriage deals with Netflix. (See Netflix Streams Onto US Cable.)

No terms of the deal were disclosed. But, like Atlantic Broadband, Grande, and RCN, Suddenlink plans to offer Netflix service as an app on leased cable set-top boxes from TiVo Inc. (Nasdaq: TIVO) that can easily integrate online video and broadcast video services. That has also been the formula followed by the two large European MSOs -- Virgin Media Inc. (Nasdaq: VMED) and com hem AB -- that have launched Netflix as a premium video service alongside their more traditional pay TV fare.

Suddenlink, which primarily operates in parts of the southeastern US and Texas, said it intends to start offering Netflix to customers sometime this summer. It did not say whether it would phase in the deployment in stages or launch Netflix throughout its regions at the same time.

What's also not yet known is how Suddenlink customers will be billed for their Netflix use. But the MSO will likely follow the model established by the three smaller MSOs and Netflix, which will bill its customers separately from the cable providers and thereby maintain its own relationship with its customers.

Suddenlink credited its new "partnership" with Netflix, at least in part, to its earlier partnership with TiVo nearly four years ago. In July 2010, the MSO notched one of the first cable integration deals with former industry pariah TiVo, opening up the floodgates for a number of other MSOs.

That scenario seems likely to play out again now that TiVo pioneers Suddenlink, Atlantic Broadband, Grande, and RCN have blazed the path once more. Look for other US cable operators that deploy leased TiVo set-tops, such as Mediacom Communications Corp. and General Communication Inc. (GCI) (Nasdaq: GNCMA), to follow suit.

Besides signing its first US cable carriage deals, Netflix has also made important strides on the peering front recently. In the past couple of months, it has also struck direct interconnection agreements with Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Verizon Communications Inc. (NYSE: VZ), two of the three biggest broadband providers in North America. (See Comcast-Netflix Peering Deal: A Game-Changer?)

In future stories and blogs, we'll have more to say about what all these new deals mean for Netflix, the cable industry, and the pay-TV market in general. Stay tuned.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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