Lots of media coverage in recent days about the relationship between Netflix and downstream last-mile ISPs, mainly Comcast. The focus of most of the attention has been on the potential impact this complex relationship between Netflix and Comcast has on "net neutrality". It looked as though Netflix would dig in its heels - unlike some other Internet content providers, such as Google, Amazon and Yahoo! - and try to force ISPs to open their pipes for Netflix content in the name of the almighty consumer. But then Netflix CEO, Reed Hastings, dropped a surprising bomb on the situation by announcing a new paid peering deal with Comcast.
In my opinion, the Netflix-Comcast deal has very little, if anything, to do with net neutrality. Rather Netflix made a decision that its business and subscribers would be better served to get Netflix content more directly connected to the Comcast last-mile network vs. sending everything through intermediary networks like Cogent Communications. The little that I understand about the Internet and the networks that make up the Internet, I certainly know that the Internet is not a single network. Rather the Internet is made up of many individual networks (i.e. for profit businesses) that interconnect with each other, through peering, in order to create the global Internet we all know, love and depend on. Most network peering arrangements are constructed based on the 2-way traffic that is constantly occuring over everyone's network and deals are based on striking a balance of sending and recieving traffic between all these networks. Well, video has changed the network traffic puzzle in a significant way. For example, the Netlix "network" is interested in pushing a ton of video traffic onto backbone and last-mile networks, but Netflix and its CDNs are not interested in (or even capable of) recieving incoming traffic from the networks through which they send Netflix content. The massive imbalance created by video networks has spawned the concept of "paid peering" in order for the carrriers and ISPs to accommodate the imbalance on their networks. It doesn't sound like that Comcast was actually throttling Netflix, which would be the thing net neutrality zealots would be screaming about. Rather, Comcast likely just allowed the "on ramp" to its network to become congested based on the amount of traffic Netflix (and its CDN) was trying to push onto Comcast's network. Solution: get "on net" with Comcast. This happens all the time in the network business. As an industry player, I don't see this news as being as big as some others do.
So, on the surface, it may seem that Netflix dealt net neutrality a blow by paying to get on the Comcast network. I disagree. Rather, Netflix determined it was in the best interest of its subscribers and its business to get itself directly on the massive last-mile Comcast network (even more massive once it buys TWC) to improve user experience. Others have posed the question, "Will Netflix prices now go up?" I don't claim to know Netflix's network costs, but I suppose that the traffic it has now agreed to put on the Comcast network directly through the peering relationship, should therefore reduce the traffic that Netflix is pushing across its intermediary CDNs, like Cogent. Not sure if its a wash, or maybe Netflix even ends up saving money, but I suspect this agreement won't change things enough to compel Netflix to raise its prices. Meanwhile, Netflix users on Comcast should enjoy a better user experience and even may get an ultra-HD signal. As a Netflix and Comcast susbcriber, I suspect I'll benefit from this news.
Lastly, the media has questioned the impact this deal might have on other, especially smaller, OTT content providers. Taking into account the aforementioned network and peering relationships that make up the Internet, the reason Netflix has become an issue for Comcast and ISPs is due to the sheer size of Netflix, the massive amount of data it is pushing across the Internet. This is the same issue for YouTube and maybe for a few other larger OTT video providers. However smaller providers should keep in mind that the networks are unlikely to care about their traffic because the impact on their networks will usually be insignificant. So unless you are planning to be as large as Netflix, you probably won't need to worry about the challenges Netflix is facing. If you do get that large, I assume that'll be an awfully good problem to have. As an OTT platform provider, I don't feel concerned about the implications the Netflix-Comcast deal specifically may have on smaller OTT video providers.
That's how I see it. What are your thoughts?
Paul D Hamm