The news media sounded a collective alarm Monday after
Any or all of this speculation may prove to be true. But I'm more inclined to agree with Frost & Sullivan analyst Dan Rayburn, who argues that the deal is an unremarkable example of the way business is done online. Rayburn predicts that Netflix will actually save money by dealing directly with Comcast rather than using a third party to deliver its video streams.
And as most of the reports acknowledge, the deal will help Netflix viewers on Comcast's network by eliminating the bottlenecks that degraded picture quality.
True, Netflix had hoped to persuade Comcast (as it has done with some other ISPs) to let it put servers within its network, avoiding the need to pay for interconnection. Instead, it appears that Comcast insisted on using commercial Internet exchanges, where networks of all sizes interconnect.
Yet Netflix is already paying for the ability to reach customers in the homes with Comcast cable modems; it's just not paying Comcast. Instead, it's been paying other Internet service providers, such as Cogent, to deliver its streams to Comcast and other broadband ISPs.
Cogent's objections notwithstanding, it's common online for ISPs to exchange traffic for free only when there's a roughly equal amount going in both directions. Like other streaming services, Netflix sends far more traffic to its customers than they transmit back.
Some observers said the deal still was problematic on "net neutrality" grounds. Netflix will pay Comcast more in order to improve the quality of its video streams, which allegedly a) gives Netflix an advantage over smaller competitors that can't afford to pay, and b) lets Comcast pick winners and losers among content providers.
But the net neutrality rules adopted by the
Maybe they shouldn't be, Timothy B. Lee argues in his
Yet that's just another way of playing the game that's already being played today. Deep-pocketed content providers can afford to pay "content delivery networks" such as Akamai to deliver their programming with fewer hiccups and at higher resolution than their lesser-known rivals can.
Lee also worries that content providers will find themselves with no choice but to deal directly with Comcast,
Other content providers have little reason to deal directly with broadband ISPs. To connect to their customers, they can choose from among numerous Internet providers and content delivery networks, whose prices have declined dramatically over the years. Those middlemen, which aggregate content from an array of sources, are likely to have much more leverage in their talks with Comcast et al. than the typical content provider would have in direct negotiations.
Ultimately, the fact that so few companies offer high-speed Internet access to homes leaves broadband ISPs in an enviable negotiating position. In most communities, consumers have no more than two options for the kind of bandwidth needed to stream high-definition movies to a television set. And Comcast's planned takeover of
That's one of the reasons The Times' editorial board raised concerns about the acquisition's potential effects on interconnection, among other issues. Still, it's hard to see Netflix's deal with Comcast as a harbinger of worse things to come. Instead, it seems more like the predictable consequence of Netflix's extraordinary success.