In a move that seems certain to have a profound impact on how Netflix negotiates with other broadband providers going forward, the streaming video service on Sunday announced it has agreed to pay Comcast for direct access to the cable operator’s network.
The deal ends a stalemate between Netflix and the cable giant, which had demanded payment in exchange for Netflix’s request to connect its servers to Comcast’s broadband network. Netflix had been hoping for a free ride.
While the two sides stuck to their guns, Comcast subscribers who accessed Netflix experienced a marked deceleration in streaming quality. According to Netflix’s internal data, the average speeds of its prime-time streams to Comcast subscribers had dropped 27 percent between October 2013 and January 2014.
In a brief statement issued Sunday afternoon, the companies heralded a new “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 one-paragraph release went on to note that the deal establishes “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.”
Under the terms of the multiyear peering arrangement, Netflix receives no preferential network treatment. Financials were not disclosed.
The deal was announced 11 days after Comcast announced it would buy out Time Warner Cable.
The Comcast deal will likely set a precedent for Netflix’s negotiations with other cable and telco ISPs. Netflix’s streaming speeds in Verizon FiOS homes declined 14 percent in January, while Mediacom subs experienced a 15 percent drop.
In its annual report to shareholders filed on Feb. 3, Netflix red-flagged its dependence on third-party distributors. In a paragraph devoted to the intricacies of bandwidth caps, the company noted how “operators have an incentive to use their network infrastructure in a manner adverse to our continued growth and success.”
Netflix went on to emphasize how Comcast had “exempted certain of its own Internet video traffic (e.g., Streampix videos to the Xbox 360) from a bandwidth cap that applies to all unaffiliated Internet video traffic (e.g., Netflix videos to the Xbox 360).”
While Netflix had hoped that consumer demand and regulatory oversight would help check the practice of selective bandwidth capping, it also could not afford to offer less-than-optimum service to its customers that subscribed to the country’s largest cable provider.
Subs accessing Netflix over Comcast's network may have noticed an improvement in streaming times as early as last Friday. App.net co-founder Bryan Berg two days ago posted a traceroute that seemed to suggest that the two companies were peering in the Equinix San Jose data center.
Netflix closed out 2013 with 31.7 million paid streaming subs, up 25 percent from the previous year.