Netflix Blinks, Will Pay Comcast For Network Access

We've mentioned several times the tension between giant streaming sources (especially Netflix), and ISPs (especially Comcast, especially given that it may merge with Time-Warner). Now, Marketwatch reports that Netflix has agreed to pay Comcast (amount undisclosed) for continued smooth access to Comcast's network customers, "a landmark agreement that could set a precedent for Netflix's dealings with other broadband providers, people familiar with the situation said." From the article: "In exchange for payment, Netflix will get direct access to Comcast's broadband network, the people said. The multiyear deal comes just 10 days after Comcast agreed to buy Time Warner Cable TWC -0.79% Inc., which if approved would establish Comcast as by far the dominant provider of broadband in the U.S., serving 30 million households" I wonder how soon until ISPs' tiered pricing packages will become indistinguishable from those for cable TV, with grouped together services that vary not just in throughput or quality guarantees, but in what sites you can reach at each service level, or which sports teams are subject to a local blackout order.

Comments

If Comcast were Exxon

[DulcetTone]

They'd be receiving money from Sears when I drove my car to the mall.

Why do people accept this?

Re:If Comcast were Exxon

[Hognoxious]

I don't see an alternative other than regulation. And regulation reduces profits, so it's communism.

George Washington gave his life to fight against communism in 1776. If you don't believe in profits, you're literally pissing on GW's grave, you bastard!

Just pay up, and if you don't like it then move to North Korea.

Re:If Comcast were Exxon

[x0ra]

Regulation leads to regulatory capture, which leads not to communism, but to oligarchy. There has been no real implementation of "communism" anytime, anywhere.

Re:If Comcast were Exxon

[Anonymous Coward]

Simple Answer: Government Granted Monopolies.

People accept it because they have no other choice, in many cases. When laws exist prohibiting even cooperative ISP's forming to provide competition, you're kind of up shit creek, unless you want to go with much slower 56k/dsl/satellite service...

As for why they put up with the laws, well, there's this two party system we have...and corporations pay both parties...rarely is there much choice on matters such as this at the ballot box.

Re:If Comcast were Exxon

[beelsebob]

Because the finance of the internet is based on a sender pays model. Peering agreements only work when you actually have (roughly) equal traffic with another ISP. In this case, the ISP serving netflix has significantly higher data sent from it than Comcast's network, so they need to start paying comcast to transport that data.

This by the way, is at the same time, why bandwidth caps and metering on a home connection is bullshit –because what you're paying is paying only for the data you send, the data you receive is already payed for by the sender.

Re:If Comcast were Exxon

[Zynder]

Some people actually believe everything you wrote.

Re:If Comcast were Exxon

[Attila Dimedici]

That is not true. There have been several implementations of communism. They have all been relatively small scale. As far as I am aware, the only ones which were at all successful were religious communities (See Hutterites). The thing to notice about all of the implementations of communism is that they were purely voluntary (that is, those who did not wish to take part in communism were free to leave the group).

Re:If Comcast were Exxon

[Grishnakh]

No, proper regulation avoids regulatory capture by enacting laws which forbid it. Other countries don't have a problem enacting and enforcing proper regulation while avoiding regulatory capture. It's just the US (along, probably, with various other corrupt third-world regimes) that has this problem.

Re:If Comcast were Exxon

[Immerman]

Now that is a horrible, horrible metaphor.

Almost from day one the internet was based on a user-pays model. ISPs A and B both have a lot of customers who want stuff from users on the other ISP. Data flows back and forth, and periodically the ISP who requested the most data paid the ISP who supplied that data, based on how many more bytes flowed A->B than B->A. It provided incentive for ISPs to seek out content-providers as customers, or to be better content providers themselves (remember, it was mostly universities to start). As the number of ISPs increased they often decided to decided to save bookkeeping headaches and enter into "nobody pays" peering agreements with other ISPs with whom they had roughly symmetric data flows, but consumer pays remained the norm in any asymmetric exchange.

Fast forward, and some ISPs are now trying to change the rules - rather than paying for the data their users consume and passing that cost on to the users, as has been done since day one, they now want to double-dip and charge the content providers as well, for the exact same data transfer they are already charging their users for I have already paid my ISP for a certain level of internet access, why should I be put up with them intentionally degrading my access to some services?

l As for the "kiosks" I'm assuming you're referring to the caching systems Netflix has offered. And again your metaphor is horrible. Under normal rules Comcast would be paying Netflix's ISP for every byte of data transferred, but Netflix offered them an optimized caching system so that instead of having to upgrade their systems to handle the load their customers demanded, as well as paying for the data itself, instead they could simply pay to transfer a single instance make all the free copies they wanted, saving them a bundle.

>Without in-depth details about the exact details of the Netflix disputes between Cogent and Comcast, Verizon, and others, I'm going to assume Cogent are acting like pricks, as usual, and give the other ISPs every benefit of the doubt.

Fair enough. But if it's a battle between ISPs, why are they dragging Netflix into it? Threaten to blacklist or throttle Cogent, and let Netflix either put a fire to their ass to shape up so other ISPs will continue doing business with them, or find another ISP who aren't pricks to begin with.

Re:If Comcast were Exxon

[leonardluen]

and what makes you think the corporations wouldn't employ their own militia in the absence of that govt protection?

heck even now many large corporations already employ their own security personnel.

Re:If Comcast were Exxon

[Lumpy]

It's called a kickback, the legal term is "franchise fees".

Re:If Comcast were Exxon

[gregor-e]

I pay Comcast for 17 mbps of downstream internet. There is nothing in my contract that constrains where I request this data from. The fact that so many of Comcast's customers all choose to fill their paid-for internet pipes with bits from Netflix means that Comcast has agreed to provide adequate infrastructure to satisfy the bandwidth requirements its customers have paid for. If Comcast is unable to provide the bandwidth they have sold to their customers, they are guilty of selling something they don't actually possess. I believe there is a word for this.

Re:If Comcast were Exxon

[Immerman]

It's user pays in the same sense as a grocery store is customer pays. In both cases the business pays for it's "imports", and then passes the costs on to their customers.

Cogent isn't dumping data onto Comcasts network, Comcast's customers are *requesting* that data - that data is part of why they're paying Comcast in the first place.

Again, if the issue is Cogent then Netflix should be left out of it. Once the precedent is established do you really think Comcast would *stop* charging Netflix if Cogent were to get their act together? Let the ISPs duke it out however they like, but leave the endpoints out of it. If Netflix doesn't like the result they can change ISPs - I hear Comcast's backbone can handle the traffic.

Re:If Comcast were Exxon

[Camael]

There's so much spin and misinformation in above post.

It's not as simple as "data transfer" where peering agreements are involved. The fees you pay aren't there to allow Cogent to dump tons of data on one link of your ISP, forcing them to carry it on their backbone across the country to the end user there, rather than upgrading their own backbone to handle the traffic properly.

No, the fees you pay are for your ISP to provide a service, i.e. the transmission and delivery of digital content you choose over their network. And if you request Netflix to stream movies to you, your ISP by golly is contractually obliged to deliver that data to you . When Netflix/Cogent sends that data which you requested to your ISP, calling that transmission "dumping" is clearly 1. untrue and 2. BS.

That's exactly what they're doing. As Cogent dumps more traffic on them, they're just not upgrading the peering points, so Cogent customers see congestion and slowdowns going to/from other ISPs.

Not only Cogent customers. The customers of that ISP will also notice the slowdown . Take Verizon for instance. When/if Verizon refuses to upgrade peering points, all of Verizon's paying customers who use Netflix will be affected. So, what do you call failing to deliver a paid for service to your own customers?

Stop taking the ISP's side and look at the average consumer's point of view for once.

Oh shit

[Enry]

Well there goes the Internet

Re:Oh shit

[ObsessiveMathsFreak]

All too true.

The net we knew is truly dying. It goes beyond the death of Net Neutrality and the resulting birth of Net Extortion exemplified by this deal. More and more we see people moving away from rich client browsers and other programs into simpler, disconnected, atomic apps, connecting to restricted, walled garden, internet services. Such services can more easily transition into a pay per-view web, whereas free-visit-traffic websites with no method of charging/locking-in users will find the going difficult. Many are already consciously damaging the usability of their own websites in an attempt to transition them toward a restricted "app"-like format-- the new Slashdot Beta being a prime example.

The internet could be moving towards an earlier proposed vision of it, from the 1980s, when it was proposed that people be nickel and dimed for each additional service they required. Every new service would require -- not a website-- but a new client program, which could naturally be regulated and charged on an individual basis. Somehow,, this outdated model the past is slowly becoming the future of our Internet.

This didn't have to happen. No technological development lead us to this point. This outcome was decided most firmly in the realm of the Law, by the Court system, and with not one pip of say-so from the programming or engineering community which actually runs and maintains the web.

If the internet genie is put back in the box, it will be the result of entirely socially/legally constructed forces.

Not long

[mbone]

I wonder how soon until ISP's tiered pricing packages will become indistinguishable from those for cable TV, with grouped together services that vary not just in throughput or quality guarantees, but in what sites you can reach at each service level, or which sports teams are subject to a local blackout order.

Not long. The cable guys are, in this way, just like the Bellheads. They see their real moneymaker as these blasted tiered services (never mind their historical roots in equipment limitations). Soon you will probably have to buy the Disney package to be able to get the Google package to be able to get slashdot.

What I think of the judges that thought this was a good idea is not fit for slashdot, much less polite company.

Re:Not long

[GreyWolf3000]

But you're supposing that you're paying for consumption. That's a very reasonable ideal.

Netflix is paying for content, which is one step towards turning them into any other "content provider," which is exactly where telcos want them to be. They want to be in between us and Netflix so that Netflix will scratch their beak.

The end game is not you or I paying for tiers of "bandwidth," it's getting us to pay for tiers of "content" -- we should resist this rather forcefully.

Re:Not long

[thaylin]

No regulation and this will just get worse. It has been shown time and time again. This is a market that requires hudge investment, and have huge monopolies already in place. Without major government intervention, at least paying for the infrastructure, there is no way many will come into the market. Even Google needed help in the areas it has come into.

Re:Not long

[whoever57]

AFAIK, Comcast is only throttling down Netflix, not fully blocking it.

And there was me thinking that Comcast agreed not to do this very thing when it bought NBC:

When it acquired NBC Universal in 2011, Comcast agreed to "net neutrality" conditions that prevent it from prioritizing its online content over a competitor such as Netflix. Comcast is expected to offer similar restrictions in its proposed merger with Time Warner Cable.

Re:Not long

[vux984]

Bandwidth is neither unlimited or free.

I fully understand this. That is why i am paying my ISP a premium for 100Mb access.

It's rather fun to see people who wand to have those with high income pay more tax, but not having big bandwidth consumer pay more for the pipe access.

What are you on about? I do pay more for 100mbit bandwidth than my brother pays for 10mbit. I am not complaining about this, nobody is.

I, for one, would be happy to subscribe to a cheaper basic service I don't mind to have youtube (or youporn) in 144p if at the end that saves me money.

Be my guest, pay the ISP less for less speed. Lots of people do that.

What does that have to do with the ISP deciding to charge netflix to provide me the high speed access to the content that I am paying them to provide me high speed access to?

This is the equivalent of me going into a restaurant with a bottle of wine. (The wine is netflix, the restaurant is my ISP.)

Now, the rules here are that I can do this, I can bring in my own bottle of wine, but have to pay a corking fee for them to serve it to me in the restaurant. I am fine with this. So I've paid for the wine (netflix), and I've paid for the corking (ISP). So that's all there is too it.

Suddenly the restaurant phones the liquor store and demands money from THEM to serve me the wine. The wine that I've already paid for myself, and which I've already paid the restaurant to serve me.

WTF

I am the ISPs customer. I am already paying the ISP a lot of money to transmit data over their network to me, from any source on the internet at high speed. Why on EARTH should netflix have to pay them as well for what I am already paying them for?

Re:Not long

[lordofthechia]

I think the better analogy is the post office.

You pay shipping to receive packages (to the post office). You also pay for the content of those packages (to whoever you bought the item(s) from).

Now more and more people start ordering stuff from Amazon. The local post office realizes that their mail trucks are filling up and they're unable to pick up all the packages they need. Some of the packages get left behind, some get crammed into the truck (and end up damaged), some make it through.

  They also notice that a third of all packages have Amazon logos.

Does the post office:

A) Use the extra money it has been receiving from postage fees to upgrade it's fleet, buy more trucks, hire more drivers, etc.

B) Pick up on Amazon's generous offer to have some items already stocked, packaged, and automatically labeled next to the Post office so that commonly ordered items can be transferred locally instead of going through the USPS's now heavily taxed fleet?

C) Extort money from Amazon in exchange for their customers receiving their packages in a timely and undamaged fashion (which their customers are already paying for).

Now you can say the main difference is that the post office is charging per package vs selling a service to its customers where they can receive a certain amount of mail (say in pounds) per day. Either way though a service is being promised, paid for, but not fully delivered.

And now to add self interest:

What if you got an ad flyer from your local post office with "Now you can order movies and books from the USPS!" while at the same time movies and books that you are paying shipping to receive from Amazon are getting delayed, crushed, or lost.

Internet access should be a socialized service

[mozumder]

There's no reason for private companies to profit off the basic requirements of a functioning society.

Communications is so critical that the US Constitution writes in the Postal service as part of it.

Internet communications should be treated as a basic service.

Once this happens, we can restructure more government services to be properly internet enabled.

Really, private companies do not serve the interests of the public. They never have. They never will.

Private companies are great at the luxuries of life, not the basics.

Re:Internet access should be a socialized service

[mrchaotica]

Vertical integration (i.e., both manufacturing the product and delivering it) is not necessarily a problem. Vertical integration where any part is a monopoly or oliopoly, however, is against the public interest and should not be allowed.

Re:Internet access should be a socialized service

[Boronx]

"We" is the people of the United State of America. What makes us special is that we've granted to ourselves the power to govern the country. There is no question that we ought to govern the country, the only question is how. You'd give unrestricted rights to businesses to do what they want. Id restrict businesses from acting in ways detrimental to their customers or to the economy as a whole. This means forcing competitors to compete and not collude, and forcing businesses to avoid conflicts of interest.

Prison companies shouldn't be able to lobby for tougher criminal laws.

Giant agribusinesses shouldn't get together to set grain prices.

Big finance shouldn't be able to recommend buying a security while they short the security.

A company that controls Aluminum transport shouldn't be able to place financial bets that the price of Aluminum will go up.

These are all happening right now, and if we let this continue and grow we'll turn into a corrupt third world hell hole.

Re:Internet access should be a socialized service

[visualight]

" I go out of my way to use private entities in lieu of the US Postal service."

Ass. The problem with government services is, wait for it, PEOPLE LIKE YOU, who warp reality to fit your propaganda derived ideology, and then sabotage things so that some fat cat can seek rent. A lot of really well run operations suck -because- they were privatized. The military commissary is one I remember well.

You are ignorant of the reality of why these private entities are able to thrive. It's *BECAUSE* they don't have to deliver every letter to every house and apartment in the country. They get to just do the high margin stuff.

And they absolutely know this, which is why they are meeting and discussing what they need to do to support the U.S. Postal service. 'Big bags of money' is a real option for them, because without the post office, *they* can't survive.

Could someone answer this?

[Nyall]

I'm sure netflix has employees whose home internet is provided by Comcast. What would prevent them, or any other customer, from starting up a class action lawsuit (mandatory arbitration maybe) that Comcast isn't providing advertised bandwidth?

Re:Could someone answer this?

[khasim]

Two reasons.

1. Comcast advertises "up to" X bandwidth. But does not guarantee any specific speed.

2. Comcast can show that you can get "up to" X bandwidth on the local segment. Just not across peering points.

This is another reason that the Time Warner/Comcast merge cannot be allowed to happen.

Re:Could someone answer this?

[Wonko the Sane]

I may not be a lawyer, but I'm pretty sure the Seventh Amendment trumps the Supreme Court

Nope.

The US Constitution is a very old piece of paper sitting in a museum.

The Supreme Court is a group of people.

A piece of paper is an inanimate object - it can't do anything.

Re:Could someone answer this?

[TheGratefulNet]

fwiw, I have comcast and its been really fast. 50meg/sec download in real honest terms. hard to believe but its true.

even with a vpn and 'watching' (yeah...) movies from europe to the US, I still get 6MB/sec (yes, megabytes) over my VPN, over comcast. this is when I term my connection in a nice safe euro country.

what I hate about comcast is that they don't offer honest pricing. it starts low then climbs and you have to disconnect their service for 6mos before being allowed to renegotiate another 'special'.

still, after being stuck with dsl for over 10 yrs (at t1 speeds or less; usually much less) the 50meg 'blast' pkg is actually quite real and reliable in my area (bay area). I don't have issues with their connection; just their business practices.

Common Carriers

[Anonymous Coward]

This is why the FCC should have classified ISPs as Common Carriers a long time ago and given themselves regulatory power over this aspect of these businesses. The FCC chose NOT to give themselves power to regulate ISPs and now we (the customers) are paying the consequences.

Extortion through lack of net neutrality

[carlhaagen]

This is how it starts.

Does this work two ways?

[Anonymous Coward]

Maybe it is time for Google, Facebook, etc.. start charging Comcast for access to their networks?

What a shame Netflix took a step back on this and what a shame Netflix didn't get any support by the giants of the internet.

Re:How soon until...

[anagama]

Regulatory burden? WTF? The only regs Comcast and its ilk adhere to are those that they purchase.

Here's what real regulation would look like -- no ISP may be a content provider of any type, nor can a parent company own both an ISP and a content provider/producer/etc. You can own one or the other, but not both.

The ONLY reason Comcast has a hardon for Netflix is because it is a content provider and Netflix threatens their model.

Is this quite the same?

[PhrostyMcByte]

This isn't quite the same net neutrality issue here. Netflix isn't paying to stop service degradation or increase priority of their traffic -- they're basically just switching service providers and paying Comcast to host their servers. It may even end up cheaper for Netflix.

Re:Is this quite the same?

[TubeSteak]

That is no where near true, and shows you did not read the article.

I think you read the article, but didn't understand what was in front of you.

1. Netflix pays Cogent to be its ISP.
2. Cogent is a Tier 1 ISP, this means that they don't pay for transit or peering bandwidth.
3. Netflix traffic keeps increasing in leaps and bounds.
4. This is a problem for Cogent's peers, because they are receiving more (Netflix) traffic from Cogent than they are sending.
5. Because of 4, Comcast/Verizon/AT&T/TimeWarner have refused to increase peering bandwidth with Cogent unless they get paid for it.
6. Because of 5, all data through those peering points are subject to lag and dropped packets.

The degradation isn't selective, which is why the GP is correct that it isn't a Net Neutrality issue.

Re:Long-term loss

[Rougement]

"Why should Netflix free-ride over ISP investments ?" They're not, I'm paying my ISP for internet access. Which sites and services I choose to access is none of their business. Netflix has set a dangerous precedent here.

Re:Let me get this straight

[Anonymous Coward]

Bandwidth is not free. As such, either you want Netflix to free-ride over Comcast investment, or you agree for the asymmetry to be compensated to Comcast.

Comcast isn't free-riding over anyone. Netflix paid for their outbound bandwidth, and Comcast's customers are paying for the inbound. Everyone's getting paid, but Comcast wants to double-dip. In 2005 Ed Whitacre (then CEO of SBC) said of popular service providers:

"Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it. So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using. Why should they be allowed to use my pipes?"

There was a serious uproar about that, with people rightfully claiming that Ed had no leg to stand on since SBC's customers were already paying for their inbound bandwidth. Exactly what is different now that makes this argument more legitimate?

Re:Long-term loss

[Rougement]

Awful analogy. I give my ISP money every month, in return I get bandwidth with which I should be able to do whatever I please. If the ISP is struggling to deliver the advertised bandwidth then that's their problem.

Cogent is 100% to blame...

[evilviper]

Netflix is having all these problems because they use Cogent, the cut-rate morons of the transit world...

This has happened hundreds of times, long before they carried Netflix streaming video:

http://www.pcworld.com/article...

https://secure.dslreports.com/...

https://secure.dslreports.com/...

https://secure.dslreports.com/...

http://www.complaints.com/2008...

http://publicpolicy.verizon.co...

http://www.prnewswire.com/news...

http://www.fiercetelecom.com/s...

https://www.datacenterknowledg...

etc., etc.

Internet Tier Packages

[Daetrin]

"with grouped together services that vary not just in throughput or quality guarantees, but in what sites you can reach at each service level"

Someone came up with a nice prediction of things to come along those lines: http://i.imgur.com/5RrWm.png

Maybe Netflix is too big for peering agreements

[rundgong]

The no cost peering agreements between the major ISPs is based on the premise that traffic flows both ways in approximately equal amounts.
Netflix is something like 30% of internet traffic and it's mostly one way. They are so big they produce more traffic than many entire ISPs.

They may be so big that no ISP can peer with Netflix's ISP without disturbing this balance.
Is it possible that the solution is that Netflix basically are forced to have multiple ISPs and connect directly to many networks?

I can see that this could lead to problems as has been mentioned elsewhere in this and many other threads, but maybe there have to be exceptions to the general rule.

Tempest in a teapot

[matthewv789]

Net neutrality is a real issue, but this is not an example of it, it's just Internet infrastructure working as it always has and as it's intended to.

Previously, Netflix did not have a direct peering arrangement with Comcast, so they paid Cogent and others for transit to Comcast.

Now, they have arranged to directly connect their network to Comcast (which was NOT the case before), and, since they are not supplying the roughly equal traffic in both directions typical of "no-pay" peering agreements, they have agreed to pay Comcast for this arrangement.

What they are paying Comcast for direct peering appears to be LESS than what they were paying Cogent et al previously for transit to Comcast... And they have a more direct, and presumably better performing, set of connections now.

This is a win-win for everyone, and has nothing to do with net neutrality. It's a simple arrangement to implement more direct and lower-cost traffic relaying.

Re:Brilliant Move

[matthewv789]

No, not at all, and I'm fairly sure Comcast has not been.

Previously, Netflix had to go through a middleman to get to Comcast (Cogent, as well as Level 3 and others). They already had to pay those middlemen, and the connections they were getting to Comcast were increasingly congested, probably due to transit providers not wanting to pay for peering even if they were sending a lot more traffic in one direction than the other, and thus the other end not wanting to invest in additional infrastructure to handle that increased one-way traffic. This is typical, has been the standard practice for the life of the Internet, and has nothing to do with "Comcast vs Netflix" or "net neutrality" etc. Peering agreements are supposed to assume roughly equal traffic in both directions from both parties, otherwise the one causing the imbalance in traffic is expected to pay.

Now, Netflix are paying Comcast directly to cut out the middleman and get better, less-congested, direct connections. This means they don't have to pay the other transit providers for the traffic they'll now be sending directly to Comcast, AND it seems their payments to Comcast will be less than what they were paying Cogent et al for the same bandwidth.

So for Netflix, this is win-win: they can cut their bandwidth bill AND get better performance and less congestion streaming movies to Comcast customers. What's the problem?

Net neutrality is a real concern, but this particular case is not an example of it.