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Netflix coughs up to cruise on Comcast

'Interconnection agreement' to provide 'high-quality video experience'

Video streaming service Netflix and carrier Comcast have struck a deal to “Provide Customers With Excellent User Experience”.

That quote comes from the near-identical canned statement issued by both parties to the deal, who both describe the deal as a “mutually beneficial interconnection agreement that will provide Comcast’s U.S. broadband customers with a high-quality Netflix video experience for years to come.”

The statements go on to say “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.” Bloomberg and The Wall Street Journal both say the deal means cash will flow from Netflix to Comcast.

If that is indeed the case the new deal is very significant, not least because it hints that Netflix feels it cannot rely on network neutrality niceties, or legislation, to secure its business.

Then there's the matter of whether Comcast is effectively charging protection money to guarantee a good user experience. The statements are both at pains to point out the lack of preferential treatment for Netflix traffic and also state they won't reveal just what is going on between the two. But no deal is done without at least a perceived benefit for both parties, so Netflix must be getting something in return. What, other than a channel Netflix doesn't hugely need, can Comcast offer beyond quality carriage? And if a promise of quality carriage is involved, could Netflix realistically ignore it?

The deal will likely become a powerful precedent, as other carriers have long been irked by “over the top” companies like Netflix that make mountains of cash without giving them a cut. Apple, for example, makes billions from the iPhone and its online stores, yet demanded fees from carriers for the privilege of allowing its handsets onto their networks. For carriers who felt they had a strong relationship with their customers, and an all-important way to take cash from their pockets each month, Apple's success is vexing in the extreme.

Other carriers will therefore surely be emboldened to consider similar deals to the Comcast/Netflix “interconnection agreement”, not least because it's hard to imagine Netflix tying its future to a single carrier, no matter how powerful Comcast will become after its looming merger with Time Warner. The likes of Verizon, recently accused of slowing Netflix traffic, are probably now speeding up negotiations for a similar relationship.

Cloud computing providers or even social networks might now find themselves invited to interesting negotiations with carriers, as their businesses also rely heavily on reliable network connections.

The Reg imagines regulators, possible goaded by rivals, will be keen to explore just what “no preferential network treatment” means before allowing similar deals to be done. Watch this space. ®

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