Netflix, Verizon Ink ISP Agreement

29 Apr, 2014 By: Erik Gruenwedel

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Deal enables faster streaming of movies and TV shows for subscribers using telecom’s broadband service

As expected, Netflix has agreed to pay Verizon an interconnection fee to ensure its subscribers using the telecom’s high-speed Internet have a smoother streaming experience.

"We have reached an interconnect arrangement with Verizon that we hope will improve performance for our joint customers over the coming months," Netflix spokesperson Joris Evers said in a statement. “It is a paid interconnect agreement."

Verizon CEO Lowell McAdam last month said a peering agreement with Netflix was imminent.

Terms of the deal were not disclosed, but likely are similar to the deal Netflix ironed out with Comcast earlier this year. The pacts do not give Netflix’s streams priority over third-party content, which would be illegal. What they do ensure is that Netflix can circumvent previous interconnection points between ISPs and transit providers such as Level 3, XO, Cogent, Tata, etc., which slowed streaming speeds.

While Netflix has acknowledged that its ISP speed delivering movies and TV shows into Comcast homes increased 65% since the implementation of the agreement, it continues to lament having to pay the cabler for faster ISP service.

In an April 24 blog, Ken Florance, VP of content delivery at Netflix, reiterated previous statements by CEO Reed Hastings and CFO David Wells that paying ISP providers such as Comcast, Verizon and (likely) AT&T, amounts to nothing more than a toll for a service (broadband) already paid for by ISP subscribers.

“Comcast [and Verizon] is not charging Netflix for transit service. It is charging Netflix for access to its subscribers. Comcast also charges its subscribers for access to Internet content providers like Netflix. In this way, Comcast is double dipping by getting both its subscribers and Internet content providers to pay for access to each other,” Florance wrote. “Put simply, there is one and only one way to reach Comcast’s subscribers at the last mile: Comcast.”

The FCC is in the process of hammering out new Internet guidelines that specifically address issues such as interconnection transit. Thus far, the regulatory body has indicated little desire to halt interconnection fees so long as they are not discriminatory or commercially untenable.

As a result, Netflix has openly stated its opposition to the proposed $45 billion acquisition of Time Warner Cable by Comcast — a union Hastings said would consolidate 60% of the Internet in the hands of one company.

“We're very concerned that a combined Comcast-TWC will place toll taking above consumer interests and will use their combined market power to the detriment of a vibrant and efficient Internet. That’s why Netflix opposes the merger,” Florance wrote.

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