WIRED
Why the Comcast-Netflix Pact Threatens Our Internet Future
- 02.24.14
- 12:38 PM
Kevin Spacey in the Netflix original series House of Cards. Image courtesy Netflix
After its popular streaming video service endured months of declining performance on home internet connections provided by Comcast — the country’s largest cable TV and broadband internet provider — Netflix has agreed to pay a fee for more direct access to the Comcast network.
In the complex and politically charged world of high-speed internet access, this is a landmark agreement. Traditionally, content providers like Netflix — which streams TV shows and movies over the net — have not paid for direct access to consumers who use home internet connections from ISPs like Comcast, and the move has sparked countless questions about what the arrangement means for the future of the internet, with many asking whether Comcast and other big internet providers will have too much control over what travels across the networks.
‘The question is whether Comcast is using its peering agreements anti-competitively or not. I just don’t think we have enough information.’
— John Bergmayer
The wildcard here is that Comcast isn’t just a company that ultimately delivers services like Netflix. As the owner of TV and movie giant NBCUniversal, it also competes with services like Netflix. The concern is that Comcast has the power to quickly deliver its own content over its own network, while charging extra for others to use the network — a situation that could prevent smaller and newer outfits from competing.
Because Comcast and Netflix have released few details about their agreement, it’s hard to predict the ramifications. “The question is whether Comcast is using its peering agreements anti-competitively or not,” says John Bergmayer of Public Knowledge, a public advocate that backs net neutrality, the notion that certain types of internet shouldn’t be prioritized over others. “I just don’t think we have enough information.”
But the agreement between the two companies — first reported by The Wall Street Journal and later confirmed in a joint announcement from Netflix and Comcast — certainly demonstrates the power Comcast now wields in negotiations with content providers and raises still more concerns over its proposed merger with Time Warner Cable, the country’s second largest cable provider.
The Traffic Jam
In January, Netflix published a report showing that the performance for its streaming video service was declining on Comcast as well as Verizon, another major internet service provider. Much like Comcast, Verizon also competes with Netflix through its digital television service and Redbox streaming video service.
Netflix’s problems were widely blamed on the connections between the two big ISPs and Cogent, a middleman network. Basically, Cogent passes traffic from Netflix to Comcast and Verizon. This month, Cogent CEO Dave Schaeffer told Ars Technica that his company was insisting that the ISPs upgrade the connections to allow more traffic to pass through into their networks, but the ISPs had demanded that Cogent pay new fees for the ever-growing amounts of traffic. Cogent balked at the fees, and a standoff ensued.
Presumably, the deal between Netflix and Comcast will see Netflix bypass Cogent’s network and connect directly with Comcast through what is known as “paid peering.” The announcement issued by Comcast and Netflix says that Netflix will not receive preferential treatment from Comcast. Although the companies are not disclosing the particulars of the arrangement, a person close to the deal tells WIRED that it’s similar to arrangements Comcast has made with other partners in recent years. In other words, this person says, Comcast will charge Netflix the same thing that it charges other companies for direct access to its network.
The Internet Isn’t a Highway. It’s Many Highways
If this ordeal sounds familiar, it’s because Comcast went through a similar controversy in 2010 with another Netflix middleman called Level 3. To understand these situations, a bit of background on how the internet works is required.
The internet — as its name implies — is a collection of connected networks. It’s less like a single highway and more like the interstate highway system. If you want to send a file from San Francisco to New York, the data will pass through a few different networks along the way, just as you would need to use multiple highways in order to drive from San Francisco to New York. In order to enable its customers to reach the entire internet, an ISP must connect with all other networks — either directly or indirectly. Connecting directly is known as peering. But when two networks that don’t have a direct connection need to reach each other, they must pass data through a middleman. This is calledtransiting.
Transit providers make money by charging other networks to carry their data. Let’s say Network A and Network B are not peered with each other, but are both peered with Network C. Network C will then charge Network A to deliver data to Network B, and charge Network B to deliver data to Network A. It’s a transit provider.
But this creates an incentive for the first two — Network A and Network B — to create a direct peering relationship of their own. They can save money by cutting Network C out of the deal, and once the connections between the two networks have been built, there’s little ongoing cost for either side. Historically, if two networks wanted to peer, they would do so without actually charging each other any fees for passing data from one to another. Peers typically needed to exchange similar amounts of data, and even if they were moving different amounts, both benefitted by avoiding transit fees on other networks. But that’s starting to change.
In the mid-2000s, Comcast began charging its peers if they sent more data than they received. That’s what happened to Level 3 in 2010 when it started handling transit data for Netflix in 2010. Like Cogent, Level 3 initially balked at paying a fee, but it soon found its connections to Comcast overloaded — not unlike an entrance ramp for a highway getting backed up. Level 3 eventually agreed to pay Comcast the peering fees.
Paid Peering and Net Neutrality
As long as all networks pay the same rate for paid peering, net neutrality technically remains intact. But because any network delivering streaming video to Comcast and Verizon will inevitably be sending much more data than they receive, paid peering looks a lot like a de facto streaming video fee. That seems particularly troubling given that Comcast and Verizon compete with streaming video companies. On the other hand, ISPs will argue that they shouldn’t provide free peering to a company that will drop such enormous amounts of traffic on them.
Paid peering looks a lot like a de facto streaming video fee.
But one thing is certain: Netflix can’t reach its customers without Comcast, and that gives Comcast an upper hand in negotiations.
Comcast, Verizon, and other consumer facing ISPs — known as access networks — are sort of like the residential streets in a city, and backbone providers like Level 3 and Cogent are like interstate highways connecting cities. If one highway becomes too congested — or starts charging a high toll — you could try taking another highway into the city. But if one company controls all the residential streets in a city, you’re not going to be able to avoid dealing with that company if you want to reach the residents of the city. That’s the situation Netflix and its transit partners find themselves in. There’s no way to reach Comcast’s millions of customers without dealing with Comcast.
“From a practical perspective, if you are paid to deliver video to Comcast customers, there is no choice but to purchase Paid Peering from Comcast,” William B. Norton wrote in his book The 2014 Internet Peering Playbook. “This is a potentially huge shift in power in the ecosystem.”
Comcast doesn’t disclose its peering prices, but Norton writes that they are roughly in line with what transit providers charge. The trouble is that there was more competition in the world of transit providers. There are few consumer facing ISPs, and with giants like Comcast gaining more and more power, competition is only decreasing. Critics worry that Comcast and others would eventually be able to charge much more for access to their networks.
The Real Issue
The government should keep all this in mind while reviewing Comcast’s proposed merger with Time Warner Cable, says Bergmayer. Even if the merger doesn’t happen, there’s a dearth of competition amongst access networks. Google’s fledgling high-speed internet service, Google Fiber, may help bring more competition, but even if the service comes to all 34 currently proposed cities, it will still cover only a fraction of the U.S. market. And since Google has its own streaming video content from YouTube to prioritize, and there’s no guarantee it will be any more friendly to net neutrality than any other provider.
Cogent CEO Schaeffer believes the government will eventually have to step in to regulate peering —something the FCC has been reluctant to do. And he’s right. Many have said that the Comcast-Netflix deal isn’t a problem because it doesn’t violate net neutrality. But the issues are larger than that. Much larger.
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