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Streaming brilliant: Netflix signs access agreement with Verizon

CEOs remain shockingly oblivious to how the internet works, says Faultline

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Comment It looks like Netflix has opened the floodgates with its Comcast deal to connect directly to its IP broadband network, and a queue of top-tier operators may have formed – with Verizon at the front.

Which is why this week Netflix has confirmed that it has signed a deal to pay for direct access to Verizon’s broadband network, a move which will guarantee improved streaming for Netflix customers which access over Verizon broadband lines. The agreement was initially confirmed over Twitter and parallels the deal struck with Comcast in February.

The truth is that if each of these companies did not have their own competitive video service, they would have gladly ushered in Netflix to make its connections for free. Video travelling straight from the Netflix CDN to the digital subscriber line access multiplexers (DSLAMs) and cable modem termination systems (CMTS) of these two tier 1 players, will relieve their own network of the effort of carrying all that video traffic in the core.

So in effect these deals are a slap in the face of net neutrality sup-porters, but at the same time Netflix needs to deliver quality video, in particular to customers who have top end pay TV services, otherwise its outputs would compare badly.

Initially both Verizon and Comcast refused to sign up to Netflix’s Open Connect CDN service, which would allow the ISPs direct access to the CDN free of charge. Cablevision signed up to Open Connect and saw its Netflix speed rating increase without having to pay for the benefit – whereas Comcast and Verizon are demanding the opposite by charging Netflix to provide a better service to Netflix customers on their networks.

Netflix highlights the highly suspect increase in Comcast customers’ average Netflix connection that came the day after the access agreement was signed – suggesting that Comcast had previously been throttling traffic and its network was perfectly capable of bearing the load it publicly bemoaned. As the change happened instantaneously, it appeared that Comcast simply needed to flick a switch to restore Netflix quality to ‘normal’ – although still at a rate well below the speed needed to stream Full HD at peak times.

The deal comes after a statement from Netflix CEO Reed Hastings that declared “the essence of net neutrality is that ISPs such as AT&T and Comcast don’t restrict, influence or otherwise meddle with the choices consumers make.” Hastings has evidently been shown that without government legislation, the future of Netflix depends on deals with the dominant ISPs, however reluctant he may be to sign up for them.

Verizon has been accused of inhibiting high-traffic services in the past. iScan engineer David Raphael’s blog post went viral after a Verizon customer service representative told him that the company was throttling Netflix and Amazon Web Services at his FiOS home, but not his FiOS workplace. Verizon was rather unapologetic on the matter.

All other details of the new Netflix deal are secret, as are the Comcast details, but the contract has been inevitable since Verizon CEO Lowell McAdams said that he expected to sign an agreement with Netflix just days after the Comcast news.

McAdams said “if you see someone come in with a lot of load on the internet with video, you’ve got to get that in an efficient place. So making the connection far out on the network is a good thing. To me, this shows you don’t need a lot of regulation in a dynamic market here. By doing these commercial deals we’ll get good in-vestments and good returns for both parties.”

This is the same position that AT&T CEO James Cicconi takes. Responding to Netflix’s assertions that AT&T threatened net neutrality, Cicconi said: “There’s no free lunch and no cost-free delivery of streaming movies,” – staggeringly forgetting that AT&T customers are in fact paying for the delivery of bits and bytes of data regardless of format, without restriction other than the maximum line capacity, a data cap and that Netflix has already paid the likes of Cogent and Level 3 to transport the data to the US ISPs.

If ever there was a moment for the FCC to assert itself, now would be the time, and we are aware that it is trying to do just that with its second attempt to put net neutrality into a rule-making.

In sum, Comcast is not charging Netflix for transit service. It is charging Netflix for access to its subscribers. Comcast also charges its subscribers for access to Internet content providers like Netflix. In this way, Comcast is double dipping by getting both its subscribers and Internet content providers to pay for access to each other.

Copyright © 2014, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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