Monday, February 24, 2014

The Netflix/Comcast Deal

Russell Brandom:

US cable giant Comcast has announced a deal with Netflix allowing Netflix’s video-streaming service a more direct route through Comcast’s network, which should improve streaming video quality for viewers. The first indications of the new deal between the companies came last week after App.net founder Bryan Berg observed more direct routes for Netflix data through Comcast’s network. The Wall Street Journal reported on Sunday night that the change was the result of a formal, paid agreement between the two companies, but Comcast does not specify how much the deal is worth.

Timothy B. Lee:

Officially, Comcast’s deal with Netflix is about interconnection, not traffic discrimination. But it’s hard to see a practical difference between this deal and the kind of tiered access that network neutrality advocates have long feared.

Dan Rayburn has a contrary take:

Today’s news is very simple to understand. Netflix decided it made sense to pay Comcast for every port they use to connect to Comcast’s network, like many other content owners and network providers have done. This is how the Internet works, and it’s not about providing better access for one content owner over another, it simply comes down to Netflix making a business decision that it makes sense for them to deliver their content directly to Comcast, instead of through a third party. Tied into Netflix’s decision is the fact that Comcast guarantees a certain level of quality to Netflix, via their SLA, which could be much better than Netflix was getting from a transit provider. While I don’t know the price Comcast is charging Netflix, I can guarantee you it’s at the fair market price for transit in the market today and Comcast is not overcharging Netflix like some have implied. Many are quick to want to argue that Netflix should not have to pay Comcast anything, but they are missing the point that Netflix is already paying someone who connects with Comcast. It’s not a new cost to them.

As does Marc Andreessen:

The venture capitalist argued that too much of the discussion about net neutrality assumes that the internet is a static thing, rather than something that is likely to increase exponentially in terms of its demand for bandwidth, and that a strict or dogmatic adherence to net neutrality would likely “kill investment in infrastructure [and] limit the future of what broadband can deliver.”

Update (2014-02-27): Ben Thompson:

What Netflix is most concerned about from a non-discrimination standpoint are broadband caps, and, more broadly, usage-based broadband pricing. It’s not that their position differs on a point-by-point basis from most net neutrality advocates; rather, the priorities are different.

[…]

That leaves unlimited access on the chopping block. While I love the idea of unlimited data, I also am aware that nothing comes for free; in the case of unlimited data, the cost we are paying is underinvestment and/or discriminatory treatment of data. Therefore I believe the best approach to broadband is usage-based payment by both upstream and downstream, with no payments in the middle.

Update (2014-03-11): Adam Rothschild (via Nicholas Riley):

While we have not witnessed a change in peering dynamics as a result of the Netflix/Comcast transaction, a trend we have seen over the past few years is the degrading quality of bandwidth from conventional “tier 1” ISPs, where peering edges have become congested due to the games described above. Network operators commonly discuss on mailing lists how the big four access shops all maintain edges which are boiling hot unless you pay them, or buy from an intermediary paying them. Where it was once possible for an enterprise or content shop to enjoy “good enough” connectivity purchasing from these providers directly, one now must enter the complex game of multi-homing to a half dozen or more providers, or purchase from a route-optimized “tier 2” like an Internap, in order to enjoy a positive and congestion-free user experience.

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6 Comments

I've been reading Andreessen on Twitter as this has been going along, and he's just plain nuts.

His core argument has primarily consisted of the idea that consumers paying for last-mile ISP service can't be charged for service entering the ISP because it'd cause publicity and regulatory problems. The self-negating, anti-consumer derp should be pretty clear.

Also, as to the Rayburn pullquote:

While I don’t know the price Comcast is charging Netflix, I can guarantee you it’s at the fair market price for transit in the market today and Comcast is not overcharging Netflix like some have implied.

It's nice for him to be able to guarantee that a monopoly railroad is willingly charging a fair price to someone whose only option is to ship via that railroad. And given that Comcast is waiting on regulatory approval for a big merger, he may well even be correct at the moment! But seriously, folks...

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The one and only nice thing about this merger is that it's pulled the peering issue out of the murk it's been in for the past year or two, and brought it onto the front pages. Who knows if it'll do any good or not, but it's nice to see some light finally shined on the issue, even if the shills will try their damnedest to obscure that light.

@Chucky This is an interesting issue because each side seems so sure that it is right. I have a hunch about which is, but it’s complicated enough that I don’t think I fully understand the situation.

To me, there is (at least) one line in the sand that's been crossed, likely a while ago already: why would anybody but Comcast's customers pay anything to Comcast? (well, except if they are renting their infrastructure to other ISPs).

And then, of course, if Comcast was trying to optimize their customer's interests, they would make sure services the customers care about, like Netflix, are at the best possible quality.

It's just the exact same confusion as with cable TV. Who is supposed to pay for what? The content creators to get their stuff in front of the viewers, or the viewers to get to see their favorite shows? The result is the mess we know, and that the internet has avoided so far.

@Charles At least with cable TV there is a (crude) mechanism for viewers to pay more to get more channels, or less to get just the basics. With cable Internet, it’s all bundled together no matter how much bandwidth you use. No one likes having to track their usage, but it seems to me that the flat pricing for “unlimited” is part of the problem, no matter how nice it seems for the customer on the surface.

> it seems to me that the flat pricing for “unlimited” is part of the problem

@michael Yes, and it goes back to the concept of the internet as a utility, just like electricity or water, where you pay for what you use. It does not scale the same way here, but those unlimited packages were always a marketing gimmick, just like the cable packages with dozens of channel are a trick to get you to pay more than what you actually use.

I am not saying the cable companies are all evil with those packages, and consumer behavior is also part of the issue, but the bottom line is that an overall good model is to pay for what you use. If one needs more bandwidth, one should pay for it. These unlimited plans need to have a cap somewhere. In the end, if Netflix pays Comcast, the consumer will pay for it through their Netflix subscription, so the cost has just been moved around, and the result is worse in many other ways.

"it seems to me that the flat pricing for “unlimited” is part of the problem"

and

"I am not saying the cable companies are all evil with those (unlimited) packages, and consumer behavior is also part of the issue, but the bottom line is that an overall good model is to pay for what you use. If one needs more bandwidth, one should pay for it."

Of course, US broadband is more expensive and slower than any other developed nation. (And the cheaper and faster nations rarely have bandwidth caps.)

And, of course, the real impetus for the coming bandwidth caps, (and they are coming), is not to price more fairly, but to drive 3rd party OTT television services out of the price range of ordinary consumers, where they directly compete with cable teevee services and in-house OTT services offered by the very same ISP's that sell you broadband.

Again, we're talking about a monopoly railroad setting prices to folks whose only option is to ship or receive via that railroad. And caps will be a major part of their discriminatory and anti-consumer pricing.

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