Netflix Pays Comcast: Have the Cable Companies Won the Fight?

Comcast (NASDAQ: CMCSA  ) has had a potentially game-changing string of victories recently. Over the past few weeks, the net neutrality rule preventing Internet service providers like Comcast from discriminating against Internet traffic and charging fees accordingly disappeared. Then, the company announced that it would acquire rival cable provider Time Warner Cable (NYSE: TWC  ) , combining the two largest cable providers in the U.S.

Most recently, Comcast and Netflix (NASDAQ: NFLX  ) announced that they've reached a deal in which Netflix will pay Comcast an undisclosed sum to allow Netflix viewers faster access to its streaming content. While Netflix's CFO David Wells has said that the "undisclosed amount" isn't significant enough to change the company's forecasts for the coming quarter, this move may open the door to a whole host of payments to Internet service providers now that net neutrality is gone, and in this segment from Thursday's Consumer Countdown, Motley Fool analysts Mark Reeth and Sean O'Reilly discuss how surprised they are that Netflix didn't put up more of a fight before forking over some money. Could this be a sign that the cable companies are going to continue to dominate for a long time to come? Mark and Sean discuss why Comcast looks like a raging buy at the moment, and they also look at the moves the company is making today, that may lead to free Wi-Fi Internet connections in every city somewhere soon down the road.

Could companies like Netflix one day bring down the cable empire?
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.


Read/Post Comments (8) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 09, 2014, at 11:40 PM, spinod wrote:

    Pretty stupid.... why do we pay these companies? To access these services.... so you take the service away, we have no reason to pay the company now do we? Netflix played its cards wrong here.... This isn't cable, you don't lose by having an ISP block you, you win. Without netflix, how many people would drop comcast? A ton....

  • Report this Comment On March 10, 2014, at 12:29 AM, Alexander1776 wrote:

    This was a bad move on Netflix part. The problem is the lack of Internet Service Providers, especially in smaller cities. It's different from the situation we have with the airlines because we can choose to fly Air Canada or British Airways instead for some international flights, but as far as internet service, you are pretty much stuck with whatever businesses are in your area. In many cases people only have one or two to choose from. I think At&T can be a good competitor against Comcast. So if Comcast does try to be like the Chinese government and block which websites people can or can't go to like Netflix, then we can say goodbye to Comcast and hello to AT&T U-verse.....

  • Report this Comment On March 10, 2014, at 1:27 AM, Spinner007 wrote:

    Take a look at it from another angle:

    Verizon FiOS has been accused of throttling down their speeds during prime time as they found Netflix users account for as much as 32% of traffic over their servers, and that type of downloading, especially in HD, is bogging them down.

    Everyone, myself included, complains about the cable companies, but we can't get speeds we need(want, really) from alternatives.

    I laugh everytime I read/see/hear that cable is going away. Unless there is an emerging technology that can replace cable at comparable or lesser prices, its here to stay.

    Going back to dial up is a not an option at this point. and wireless companies have limited bandwidth issues.

  • Report this Comment On March 10, 2014, at 6:35 AM, Ovted wrote:

    The thing is with other competitors out there what is to say that now netflix is guaranteed to be played at regular speeds while throttling other services such as twitch hulu and more. Also netflix has been in the past the target of throttling and what would keep the cable company from throttling otherwise now that net neutrality has been lifted. On another note what prevents a company from throttling down to 0.1%of their normal speed(unuseable) from their competitor websites they aren't blocking the site. There are so many ways to abuse what net neutrality prevented we need to get it back.

  • Report this Comment On March 10, 2014, at 12:23 PM, jduque000 wrote:

    Several points or questions on this matter may be as follows:

    1. Currently what does the network infrastructure consist of to allow Netflix to connect and stream its product to the various ISP's?

    2. Is there currently a 3rd party device that receives the initial hand off from Netflix prior to being routed to the numerous ISP's servers?

    3. If a 3rd party device (or connection) is used, what role does the competing network traffic being managed by that 3rd party device play in the overall delivery of Netflix's product to the ISP's

    4. After the deal with Comcast, what does the network infrastructure look like for Netflix to stream it's product onto Comcast's network compared to that of other ISP's that did not make this "deal"?

    5. After the Deal, does Netflix now have a more efficient "preferred path" to Comcast that allows for better quality of service, resulting in a better end user experience?

  • Report this Comment On March 10, 2014, at 1:14 PM, sabebrush6 wrote:

    However ---------- if the cable costs get to high, just drop it for a while any way and go out and do something productive. Like being outside. Read a book. Work on your hobby. Lose a couple extra pounds by walking.

    .

    Anything to get a way from the boob tube. Mostly just rerun garbage anyway. Do yourself a favor.

  • Report this Comment On March 10, 2014, at 2:33 PM, jboscoe wrote:

    I believe that it was inevitable that Time warner was going to taken over reguardless of how we percieved it. The internet was to be controlled fully as soon as we were 'hooked' just like the analog to digital conversions for more bandwidth for the radios. Its only going to get more costly due the huge amount of broadband access that is readily available. Its in my opinion just like the oil consuption. Its limited untill we find an alternate source. We as the end user will always pay for the services or drop them. Take care everyone ..

  • Report this Comment On March 10, 2014, at 6:02 PM, sirangus wrote:

    I understood the net neutrality law was only struck down in the district where the Court of Appeals that struck it down sits. Everywhere else it is still the law.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2869603, ~/Articles/ArticleHandler.aspx, 12/17/2014 3:02:35 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement