Last week, Netflix signed a deal with broadband company, Comcast to improve the quality of its users’ streaming experience.
The deal is the result of years of debate over who should bear the cost of the internet pipes carrying a growing volume of online videos. Should it be broadband providers like Verizon, AT&T or Comcast who own the connectivity channels? Or should it be content companies such as Netflix which are sending more and more heavy content through those channels? In the recent years, major Tech company such as Facebook, Microsoft and Google had started paying broadband providers for direct connection. Those partnerships resulted in a better, faster and smoother access to the network by those companies. However, despite its 30 million users, Netflix’s CEO Reed Hasting was still resisting such partnerships.
The reason why, Netflix ended up signing the deal was partly due to a U.S Court Decision on “network neutrality rules” that allowed broadband providers to block or degrade the traffic of third-parties companies such as Netflix. Put into practice, such decision would have had a strong and negative impact upon Netflix’s users’ streaming experience. This Court decision authorised broadband providers to use pay-for-prioritisation methods thus charging content companies for a faster connectivity. Until now, Netflix had been taking advantage of a 2010 rule on the Open Internet Order that forbid broadband providers from blocking services or charging content providers for access to the network. Verizon was at the forefront of the opposition of that decision. Everything changed with this last Court decision. Netflix deal with Comcast is considered as “the latest sign that broadband providers are gaining leverage in their dealings with content companies.”
There are multiple reasons why Netflix signed the deal with this particular company – Comcast. First, a majority of Netflix’s customers are using it as their broadband provider. Second, the company recently bought Time Warner Cable Inc., another major connectivity provider. With this acquisition, Comcast became the dominant broadband provider in the United States with about 32 million households. However, other deals with other network companies will have to be signed in the very near future if Netflix wants to offer the same streaming quality to all of its customers.
Both companies have confirmed the deal and subsequently released a joint statement that said, “Comcast Corporation and Netflix, Inc. today announced a mutually beneficial interconnection agreement that will provide Comcast’s US broadband customers with a high-quality Netflix video experience for years to come. 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.”