News Column

Netflix and Comcast Reach Streaming Deal

February 24, 2014

By Bob Fernandez, The Philadelphia Inquirer

Netflix reached an agreement with Comcast on the streaming of movies.
Netflix reached an agreement with Comcast on the streaming of movies.

Netflix and Comcast Corp., two of the most powerful companies on the Internet, resolved long-standing differences Sunday on how the two conduct business that will result in drastically improved Netflix video streaming into millions of American homes, company officials said.

Netflix will now connect directly to Comcast's broadband network in "dozens" of locations around the nation instead of streaming its movies and TV content through third-party Internet content-delivery companies that some believe were expensive for Netflix and degraded its service. Comcast is the nation's largest residential Internet provider, serving 19 million users.

The Comcast/Netflix arrangement could help Comcast politically in Washington as it seeks regulatory approval of its giant $45.2-billion merger with Time Warner Cable Inc., announced less than two weeks ago.

Netflix has directly connected its servers loaded with Netflix entertainment content to Comcast's network in about five locations and that number will increase dramatically in the coming weeks, which should lead to an "optimized Netflix experience," sources close to the deal say. Netflix's video streaming can account for 30 percent of the traffic on the Internet during peak.

Netflix is reportedly negotiating with other Internet service providers, such as Verizon Communications Inc. and AT&T Inc., over how to flawlessly deliver its content over the Internet.

Critics have said the Comcast/Time Warner Cable merger, if approved by federal and state regulators, would consolidate Comcast's power in the residential Internet market and pose a threat to online companies such as Netflix. Comcast could interrupt or slow Netflix's streaming of entertainment content to protect its legacy cable-TV business, critics have said. Mark Cooper of the Consumer Federation of America said Comcast could be a "choke point" for online streaming companies.

Comcast and Netflix had been negotiating for months over the highly technical arrangement, beginning last September, and the arrangement was not timed to gain political advantage in the Comcast/Time Warner Cable regulatory review, sources say.

Comcast and Netflix issued a joint statement on Sunday after independent experts noticed new Internet traffic patterns between the two companies.

The two companies called their deal a "mutually beneficial interconnection agreement that will provide Comcast's U.S. broadband customers with a high-quality Netflix video experience for years to come. Working collaboratively over many months, the companies have established 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."

The new Netflix arrangement is similar, Comcast officials say, to existing arrangements the huge telecommunications provider has with YouTube, Hulu and Amazon Prime.


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