Comcast, Netflix Deal Shows the Future of Net Neutrality

Netflix and Comcast raised eyebrows over the weekend when they announced a deal where the video streaming company will pay to ensure its content won't stutter or stall on Comcast's network. The deal sounds a lot like a no-throttling agreement, which flies in the face of net neutrality, but the real issue may not be as simple as that.

Netflix pays Comcast to unclog video streamingNetflix pays Comcast to unclog video streaming

The problem for Netflix and its subscribers was that video quality on Comcast's network has been steadily degrading, leaving customers with lower stuttering movies ands TV shows. The problem behind the poor streaming video performance has been Comcast's refusal to open up more ports to accommodate the bandwidth needs of its customers. For Comcast, the issue was Netflix refusing to pay for the bandwidth needed to handle the video streams.

The bottom line was that Comcast wanted money from Netflix to guarantee quality streaming, and Netflix wasn't willing to pay. On the surface, it looked as if Comcast has been intentionally throttling Netflix video streams to force a deal -- a move that doesn't follow the spirit of net neutrality, and goes against the agreement Comcast made when with the FCC when it bought NBCUniversal in 2011.

In reality, Comcast has been living up to that agreement because it does treat all traffic on its network equally. It's the traffic coming into its network that's getting throttled, so to speak. That's a fine, but important distinction.

For Netflix, the issue is that its data is essentially hitting a brick wall when it gets to Comcast's network. Some of the streaming data is getting through, and once it does, it makes it to Comcast's customers just the same as Web pages and email. The rest of the data stream that doesn't make it through the wall is just lost and has to be resent.

What Netflix wanted Comcast to do is open more windows in that wall to let more data pass through for free. Comcast, on the other hand, wanted Netflix to pay for those windows to open -- and ultimately Comcast won.

Comcast said in a statement,

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

In other words, Netflix is paying for those windows into Comcast's network to be opened so its data can get in, but once inside, those video streams are treated just like any other data packets headed to customer's computers. Net neutrality is maintained, even though Netflix is doing exactly what the concept is supposed to prevent: companies paying to ensure their data actually gets to customers.

Now that the precedent has been set, it's a pretty safe bet we'll see more companies line up to charge Netflix for guaranteed network access. Verizon is very likely at the top of that list.

Verizon has been strongly opposed to net neutrality regulations and even went so far as to sue the FCC over its rules. The carrier won on a technicality and effectively killed the FCC's net neutrality regulations. The Commission plans to introduce new regulations soon, but until then carriers can set up any deals they want, and those deals will stay in place regardless of what rules the FCC imposes.

From Verizon's perspective, companies that use unusually high amounts of bandwidth should pay. Peering deals, as they're known in the industry, let carriers like Verizon and data traffic management companies such as Cogent Communications (the company that has been managing Netflix streaming traffic) send data across each other's networks for free as long as the amounts are roughly the same.

"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," Verizon's David Young said. "When the traffic loads are not symmetric, the provider with the heavier load typically pays the other for transit."

Transit is the system where data moves between networks on the Internet. In this case, it's the streaming data for movies and TV shows sent by Netflix through Cogent and then on to ISPs such as Comcast and Verizon.

ISPs like Comcast and Verizon have seen Cogent, and by extension Netflix, as data freeloaders because the streaming video content is accounting for a substantial amount of the traffic on their networks.

For end Comcast subscribers, the deal means the Netflix content they watch won't be throttled any more. For Comcast, it means they're finally getting the money they wanted all along from Netflix. It also means Netflix will be paying Comcast's competitors before too long, as well.

When the FCC's new net neutrality rules are in place, the deals that are happening now will stay in effect. Similar deals will most likely continue to happen after the fact, too, since they apply to data within the carrier's networks, and not the content that's outside trying t get in.

Customers pay Comcast and Verizon to deliver the content they want, and that's what they expect to get. Charging the content providers sends a message that says, "If you don't pay us, your content won't make it to our subscribers," which feels like a contradiction considering the commitment they made to paying customers.

Net neutrality will hopefully keep all data equal on carrier's networks; outside of those networks, however, ISPs have the control because they can always find bandwidth problems for companies that don't pay up.

Comcast's deal with Netflix doesn't kill net neutrality, but it does make it clear just how limited the FCC's control will be. ISPs will push content delivery companies such as Netflix into deals, and those companies will pay. Eventually those costs will get passed on to customers and we'll pay, too, because we want our TV shows and movies.