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Comcast/Netflix: Fearing the end to net-neutrality... or just a price hike?

Over the weekend Comcast announced a "mutually beneficial interconnection arrangement" with Netflix that should improve the quality of Netflix streaming for Comcast customers. While it's raised alarms, it's also provoked a few article writers to declare this another nail in the coffin for net neutrality. As usual, the truth is much more complicated.

Comcast and Verizon have both been in the public crosshairs because Netflix streaming has been demonstrably more trouble-prone for customers of both Internet service providers — frequent buffering issues or errors connecting, for example. Netflix's internet service provider, Cogent, says that both ISPs are refusing to open new ports to allow more traffic through, despite demands from their customers. Verizon, for its part, says Cogent is the problem because they won't pay. Verizon (opens in new tab):

...Cogent is not compliant with one of the basic and long-standing requirements for most settlement-free peering arrangements: that traffic between the providers be roughly in balance. When the traffic loads are not symmetric, the provider with the heavier load typically pays the other for transit...

"Transit" is how Internet data travels between networks. Data is exchanged between the networks — in this case, between Cogent and Verizon. What's at issue is that Verizon (and Comcast) have been accepting much more data through Cogent's network, because of its relationship with Netflix, than they have been sending.

From Cogent's perspective, their customer should pay the freight for data transmission, just as you and I pay to access the Internet, and that's it. Ars Technica:

"We believe firmly in bill and keep," [Cogent Communications CEO Dave Schaeffer] said. "We bill our customers and we connect them to the Internet, and it's our job to deliver to them the best quality possible. Verizon is billing its customers, and it's got a lot more of them and it bills a hell of a lot more, and they're not committed to delivering their customers what they promise the customers they're going to deliver."

So up until now, it's been a game of chicken between big ISPs. And it would appear that Netflix finally blinked. While the terms of Comcast and Netflix's arrangement were not disclosed, word is that Netflix is paying Comcast for the privilege. Wall Street Journal:

Netflix Inc. has agreed to pay Comcast Corp. to ensure Netflix movies and television shows stream smoothly to Comcast customers, a landmark pact that could set a precedent for Netflix's dealings with other broadband providers, people familiar with the matter said.

The death of net neutrality? Not so fast

There was one sentence from Comcast's press release that jumped out at me:

Netflix receives no preferential network treatment under the multi-year agreement, terms of which are not being disclosed.

Why include that?

It ultimately comes down to net neutrality: the principle that Internet service providers shouldn't discriminate or charge differently depending on what type of content is being delivered to their customers.

Comcast is already bound by a net neutrality agreement it reached with the Federal Communications Commission (FCC) and Department of Justice (DOJ) when it acquired NBCUniversal in 2011 — an agreement that's in place until 2018. When the FCC's own Open Internet Rules were overturned by a federal appeals court in January, Comcast was quick to reiterate plans to continue to abide by those principles:

Comcast will continue to be under the FCCs Open Internet Rules as agreed to in the NBCUniversal transaction order.

But doesn't it seem like Comcast has been violating that already? Netflix traffic has been demonstrably slower on Comcast's network over the past few months, right? Well, in point of fact, Comcast is abiding by what it believes to be the fundamental concept of net neutrality: Comcast's agreement covers its treatment of data over its own network to customers. It doesn't say anything about how the company treats data from elsewhere.

In other words, once a packet of data from Netflix is on Comcast's part of the network, it's treated the same just as any other data. It's getting the data to Comcast that's been the problem, because Comcast hasn't opened up as many lanes of traffic from Cogent as Cogent wanted it to.

Even the chairman of the FCC, Tom Wheeler, has made this distinction. GigaOM:

A lot of people seem to think the whole peering and interconnection topic is the same as net neutrality. It's not, it's a different issue — it's a cousin, maybe a sibling, but it is not the same issue.

And that's the crux of it. A lot of what you've probably read about this agreement so far conflates peering and transit issues, which have existed since the dawn of the Internet — and net neutrality. They may ultimately be two sides of the same coin, but they aren't the same thing, at least according to FCC Chairman Wheeler. Who, it should be noted, was a lobbyist for the cable and wireless industry prior to his appointment.

In fairness to Comcast, Cogent, Verizon and everyone else in this big bag of hurt, for as long as the Internet has existed, network operators have been trying to figure out ways to make sure that data gets from point A to point B. That interconnection, and the friction between service providers of all sizes to balance that network traffic, has grown in complexity just as the commercial Internet has grown.

Where's the beef?

It's easy to get your head spinning as you try to unravel the Gordian Knot that is net neutrality, peering and transit and the rest of it. And quite frankly, I think it's a lot more than anyone should have to bear. We can leave it to the policy wonks to figure out how best to handle this in the future: if this is something that needs some sort of legislative oversight, if ISPs need to be classified as common carriers, or if something else needs to be done.

But for you and me, it's entirely academic whether Comcast is treating the data on its own network the same, or is simply acting as a gatekeeper further upstream because the net result is the same: It's been harder to get reliable, consistent quality service out of a company that we're paying a subscription fee to each month.

Netflix did what it had to improve the experience for its Comcast customers, and I have little doubt that it'll come to similar arrangements with other major ISPs too. Let's just hope they don't end up raising prices as a result.

  • To quote a friend of mine, I'd pay an extra buck or two for more content, but not just to get the content I already signed up for.
  • Rene I am so with you on that. Here is my thing. I don't use Comcast, I won't use Comcast, yet I am sure I will get to pay for those who do. I will pay an additional $1 or $2 for more streaming content from Netflix but if I see my monthly charge go up to pay for someone else to get their Netflix because Comcast is the worst company to do business with, I will drop Netflix.
  • Rene, agreed 100%.
  • Why didn't Netflix just put up a notification during poorly streamed shows to "call your service provider" it would instantly draw attention to the end user. And the switchboards would light up. Even enlist Google to help provide a number that pops up for said ISP.
  • This, infinite times this. But, peering != net neutrality busting. I said this further down, but basically, it's a peering thing. They optimized the speed Comcast gets the data, but didn't pay for Comcast to send the data to us* any faster, right? *I don't have Comcast.
  • This issue reminds me a lot of the problems between the cable companies and individual channels looking for more money. Where I live, NBC was off of Time Warner cable for months as they played a game of chicken as to whether TW would pay more for the channel. This is one of the reasons that cable bills keep going up & up. Unfortunately, I believe the same thing will happen here, where Netflix will increasingly have to pay money to more & more companies to keep the pipes sufficiently open. At the end of the day it's eventually going to lead to price hikes. Sad but seemingly inevitable after that first domino has fallen.
  • I share your view about the first domino falling. Is Comcast now going to require MLBTV and NHL GameCenter to pony up additional money so those watching broadcasts of live games don't have to endure what Netflix customers just went through? My guess is yes and what ever cost is incurred by MLB and the NHL will be passed on to customers.
  • It all depends on how much traffic their respective CDNs are generating. Clearly there's a tipping point at which the ISPs decide that they need cash to open more ports. I'm not aware of MLBTV, NHL GameCenter et al generating that much traffic, while Netflix generates, by some estimates, one-third of the Internet traffic in the U.S. some nights.
  • Great review of the issue Peter. For my money they should be regulated more as a utility. This gatekeeper role they are trying to assume is a distinction they are jockeying to make in order to say they are neutral on data within their system, but then still get to gouge anyone outside that their customers need to access. Since there is no real local competition, because of the nature of the wired infrastructure, then they should not be allowed to gouge both sides of the same access coin, which is what they are attempting to do. But what is in the best interest of the consumer, and in this case ultimately the nation with respect to education, security and business, is seldom considered when ISP lobbyists have any voice in the discussion.
  • Isn't this just Peering, not Net Neutrality? As in they're not paying to get faster on the front end, just having their content load faster from their back end?
  • If Netflix clients reflect movie data back to their data center, then traffic in & out of Cogent would be symmetrical - problem solved! Meh he he.
  • This is something Netflixx has to tread very carefully. The last hike caused a major loss of subscriptions. Sent from the iMore App
  • Netflix`s stock has more than doubled since they raised their prices. I don't think another small increase will hurt them. However, im sure they will eventually reach the point when people will leave for the next cheaper option.
  • Comcast will always go up in price. I recall when full features were only $9.95 a month. No there was not just three stations. If you have two TV's, and internet service, average cost is now $200.00 a month after the initial promotion deal. I am waiting for the new Apple TV, and will get an HDMI TV, and cut the cable. News I can get off the internet. I will not miss local stations. I get them on the iPad for the local news.
  • I wonder if consumers like you (us) are the underlying reason for Comcast playing hardball with Netflix. With the acquisition of Time Warner, Comcast is set to become the a mega provider of television content. At the same time the availability of Netflix, Crackle, Hulu, MLBTV, etc... make paying $200 a month for Comcast's television packages a waste of money for a lot of consumers and many are now cutting the cable. Here is a prediction; Comcast internet subscribers who also purchase Comcast's cable television service will receive preferential treatment in regard to internet availability.
  • Peering is a bit of a red herring here. If Cogent sends more data to Comcast, it is *only because Comcast customers are requesting that data.* the amounts of data are high because Comcast has aggressively courted customers and expanded its subscriber base on the promise of that access. Simply put, Comcast has already charged its customers for the ability to get that data, and now it wants to double-dip by charging the provider as well. Sent from the iMore App