No, Netflix's New Deal With Comcast Probably Won't Destroy The Internet. Yet.

from the too-many-experts,-not-enough-data dept

The mysterious performance problems customers on large ISPs (specifically Verizon, AT&T and Comcast) have been having with Netflix streaming has just gotten slightly clearer. For months people have posted traceroutes as undeniable proof that large ISPs like Comcast, AT&T and Verizon had intentionally been throttling subscriber Netflix streams. However, as we've been noting, simple route analysis doesn't tell the whole story, and it's not always possible to determine where video transit breakdowns are occurring without direct access to ISP network data (data they hide completely).

Adding a sliver of insight into the problems, Netflix and Comcast announced over the weekend that they had struck a new interconnection deal that involves Comcast providing Netflix with direct access to the Comcast network. The announcement itself says little, other than to insist that Netflix "receives no preferential network treatment under the multi-year agreement." A Wall Street Journal report had a little more insider detail, noting that the two sides bypassed core network operator Cogent in an arrangement that involves Netflix paying Comcast for direct access:
"(The connection to Cogent) was starting to become overwhelmed with Netflix traffic, congesting traffic and leading to slower Netflix streams for Comcast Internet users, people familiar with the matter said. At the same time, Comcast presented Netflix with more attractive deal terms than the operator had been offering, the people said. The deal spans several years. Netflix was aiming for a long-term deal to make sure its projected traffic growth wouldn't put it at a disadvantage, one of the people said. The connection is a so-called "paid peering" deal, which connects Netflix's network to Comcast's directly. Netflix was previously using several middlemen to access Comcast's network."
Why the sudden interest on Comcast's part in getting a deal done? They're likely not too excited about the fact that they've been receiving bad press for poor Netflix streaming performance at the same time they're trying to sell regulators on the purported technical benefits of their $42 billion acquisition of Time Warner Cable.

Despite a lot of Internet hand-wringing about the deal and counter-kvetching about said hand-wringing (all based on no actual data, mind you) -- the agreement on its surface appears to be good for everybody involved except Cogent. That's thanks to the fact that in this case, Comcast appears to have been willing to make apparent concessions on price and deal length in order to keep up appearances for the merger. Netflix pays the same money they were paying Cogent to Comcast (or less), Comcast makes revenue they weren't making before, and customers get better streaming performance at no added costs (since Netflix is probably paying about the same, for now).

The problems are twofold: one, these deals are kept highly secret so promises of "no special treatment" aren't something people can confirm, and as Timothy Lee at the Washington Post discusses, the continued expansion of last mile ISPs into CDN and transit markets over time (note this is not new) could potentially lead to higher prices and less competition overall across the Internet's core:
"The fact that Netflix agreed to pay Comcast suggests that Cogent will likely lose its fight with Verizon as well. And as Cogent's chief executive Dave Schaeffer told Ars, "once you pay it's like blackmail, they've got you, there's nowhere else to go. They'll just keep raising the price in a market where prices [for transit] are falling." Indeed, in the long run, this development threatens the survival of independent backbone companies like Cogent. If it becomes industry practice for backbone providers to pay residential ISPs, companies like Cogent will become mere resellers of access to the networks of large broadband companies. Or they may be cut out of the loop altogether, as large customers such as Netflix cut deals directly with broadband providers such as Comcast."
I'm not sure Lee helps his argument by bringing net neutrality into the discussion though, as this is again more about market power than neutrality (for the moment). It's also worth noting that Cogent has a reputation of being difficult in peering disputes, and when a breakdown happens, more often than not Cogent is at the heart of it for not following through on truly balanced peering. Cogent was busy telling media outlets last week that it was Comcast and Verizon that were to blame for recent slowdowns. To hear Cogent tell it, Verizon and Comcast have been refusing to upgrade their interconnection links, largely because the ISPs want to move from an era of settlement-free interconnection, to one where the ISPs play a larger role in transit and get paid:
"This isn't the kind of problem consumers can solve by purchasing a faster Internet connection, because they'd be paying only for a faster path to Verizon's network, not a faster path to the rest of the Internet. In some cases, Verizon has actually purchased and installed the necessary equipment to upgrade ports, but not turned it on, according to (Cogeco CEO) Schaeffer. "They actually put it in, so they spent the money, but they just politically have not been willing to turn it on in order to ensure that Netflix will not work as well as Redbox," he said. When Netflix can't get through to Cogent, it sends traffic through other providers, but Schaeffer claims that "everybody is full." So what are they fighting over? Schaeffer said Verizon "wants a price that is about 10 times the market price for transit." Again, transit is a service that takes traffic across the entire Internet, whereas peering is just a connection between two networks."
To intentionally belabor a point again though, nobody can confirm anything either side says because the details aren't released. Meanwhile, while the Comcast deal might not be bad, the worry among consumer advocates is that in a world where ISPs get bigger and more powerful and transit options are reduced and replaced under absolutely no transparency, the overall industry could get less healthy. With Comcast controlling the last mile conduit, an ever-increasing slice of the core networks, and the media content itself, you start to see the monopsony concerns Comcast's expansion could raise among antitrust regulators.

Remember of course this deal only impacts Netflix on Comcast, there's continued ongoing problems for Netflix and YouTube traffic reaching the networks of a number of larger ISPs (Time Warner Cable, AT&T and Verizon), with no indication of when they'll get resolved. While I don't think the FCC's Wheeler is going to do much of anything meaningful on broadband competition, net neutrality, or prices, I do think he'll work to find some way to bring a dash more transparency to these disputes if everybody involved can't start getting along. Mainstream services grinding to a halt with nobody willing to admit fault and everything kept in the complete dark is simply bad for business. For everyone.

If this is all tl;dr for you, all you need to know is that if you're on Comcast and your Netflix streaming stinks you should either see improvements right away, or sometime over the next few months as the changes are implemented.
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Filed Under: broadband, streaming, throttling
Companies: at&t, cogent, comcast, netflix, time warner cable, verizon

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  1. icon
    John Fenderson (profile), 25 Feb 2014 @ 8:52am

    Re: Re: Destruction

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    "It amazes me where people draw the line"

    What's so amazing about wanting to discourage spam?

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