Why does Netflix deny it’s buying preferential treatment?

Netflix is paying cable giant Comcast a pile of cash for what the companies say will be “no preferential network treatment.”

Sure, because corporations routinely give money to one another just for the fun of it.

The reality is that Netflix is handing Comcast an unspecified chunk of change, likely millions of dollars, for what they say is a “more direct connection” to the cable company’s broadband network.


That’s preferential treatment. And that’s not necessarily a bad thing.

The deal, announced over the weekend, has broad ramifications for consumers. First, it could place the cost of Netflix’s bandwidth-hogging service on the shoulders of Netflix subscribers, who will presumably see their rates rise to accommodate the payoff to Comcast.

Secondly, it demonstrates the growing muscle of network owners such as Comcast, Time Warner Cable, AT&T and Verizon — companies that are the gatekeepers of broadband Internet access.

These telecom behemoths are beginning to use their market power to extract hefty sums from content providers desiring extra-zippy access to their networks.

And never mind that this is completely contrary to how federal regulators say things are supposed to work.

“This agreement is in no sense the outcome of a free market,” said Craig Aaron, president of the digital rights group Free Press. “This isn’t voluntary. This is Comcast having Netflix over a barrel.”

Lowell McAdam, chief executive of Verizon Communications, wasted no time in announcing Monday that he too wants a taste of this action. “I think there’s a good opportunity here,” he said on CNBC-TV.

This would be the same Verizon that, according to Netflix, experienced a 14% drop in video-streaming speed for Netflix customers from December to January, even though speeds on most other Internet service providers held steady.

Neither Verizon nor Netflix said the slowdown was deliberate. But it’s not hard to imagine someone in Verizon’s control room turning down the dial on the Netflix feed to get a point across to the streaming service.

Netflix accounts for about a third of prime-time Internet traffic in North America, according to broadband research company Sandvine. Stir YouTube into the mix, and that’s half of all online traffic between 6 and 10 p.m.

So if you’re paying a monthly fee for a broadband Internet connection but you’re not availing yourself of these services nightly, you’re helping pay for other people’s data-fat digital diets.

Kind of like the way pay-TV packages are stuffed full of channels that most people never watch. Pay-TV companies say this boosts diversity by having popular channels subsidize less-popular programming.

The truth is that it forces people to pay for products they don’t want. That’s unfair, just as it’s unfair for light Internet users to have to pay for other people’s heavier network demands.

This is where net neutrality enthusiasts will jump up and say, “Hey! All online content should be treated the same!”

And I agree with that in principle. But from a consumer perspective, all online content isn’t the same, and it isn’t accessed in equal measure by all Internet users.

If you use the Net to send email and read headlines, you’re using significantly less bandwidth than someone binge-watching the Netflix series “House of Cards.” Pricing for Internet access should reflect that difference.

This is why I favor some sort of mechanism that places a heavier financial burden on the Net’s heaviest users — and Netflix’s deal with Comcast appears to be a step in that direction.

At the same time, Internet access obviously requires parental oversight. Gatekeepers like Comcast have proved themselves anything but neutral and impartial in terms of how their networks are run.

For instance, it’s not clear that Netflix was actually straining Comcast’s digital pipes. Perhaps it was. Or perhaps Comcast decided to give Netflix a nudge and say: “Nice little service you have here. Sure would be a shame if it ran out of juice.”

The idea of a level online playing field collapsed last month when a federal appeals court ruled that the Federal Communications Commission lacked the authority to turn the screws on Internet service providers. Verizon had sued to overturn the agency’s net neutrality rules.

The FCC has said it will take another crack at net neutrality. One approach would be to reclassify Internet service providers as telecommunications companies, which would give the agency jurisdiction over the industry.

Barring that, more nuanced rules would be in order, accommodating the reality that a Netflix and a Yahoo Mail don’t place the same demands on broadband systems and that their users, therefore, shouldn’t be paying identical charges.

In fact, shouldn’t the Internet bills of Comcast customers who don’t use Netflix go down? Will they soon experience less online congestion?

John Bergmayer, senior staff attorney for the advocacy group Public Knowledge, said it would be easier to understand the workings of the Comcast-Netflix deal if the companies were more honest about what they’re up to.

As it stands, he said, the secrecy surrounding the terms of the arrangement “raises the question of whether they have something to hide.”

But that couldn’t be the case. After all, Comcast and Netflix readily admit that money is changing hands yet no preferential treatment is involved.

Who wouldn’t believe that?

David Lazarus’ column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to