Netflix Deal With Comcast Revved Speeds 66% From Jan. Low

Comcast's delivery of Netflix content lags behind other major service providers.

Apr 14, 2014 at 4:22PM

SAN FRANCISCO (AP) -- Netflix's videos are streaming through Comcast's Internet service at their highest speeds in 17 months, thanks to tolls Netflix pays Comcast for a more direct connection to its network.

The data released Monday by Netflix provide a concrete example of the special access that money can buy amid a debate about whether the Federal Communications Commission should draw up new rules to ensure that all online content providers are treated the same by Internet service providers.

The equal-treatment doctrine, known as net neutrality, has become a thornier topic since January when a federal appeals court overturned the FCC's regulations on the issue. Net neutrality is also drawing more attention as Comcast tries to gain approval of its proposed $45 billion purchase of Time Warner Cable, another largest Internet service provider.

As the world's largest Internet video subscription service, Netflix has long supported net neutrality as a way to prevent online service providers from giving better treatment to websites willing to pay additional fees for the privilege. Nevertheless, Netflix agreed in mid-February to pay an undisclosed sum to Comcast Corp. to create a new avenue for its videos to reach Comcast's service.

The toll produced an immediate dividend for the Netflix subscribers who are among the nearly 21 million households and businesses that rely on Comcast's high-speed Internet service to watch movies and television shows.

Comcast delivered Netflix video at an average rate of 2.5 megabits per second during March. That was a 66% increase from a recent low of 1.51 megabits per second in January.

The March performance also topped the previous monthly high of 2.17 megabits per second that Netflix had recorded on Comcast. Netflix began tracking the streaming speeds of Internet service providers in November 2012.

Higher streaming speeds allow users to take advantage of higher quality video offerings and translate to fewer interruptions in the picture.

That's good news for Netflix because higher-quality video should please many of its 33 million U.S. subscribers who pay $8 per month for the company's video streaming service. But that doesn't necessarily mean the Los Gatos, Calif., company is happy about the circumstances that prodded it into the Comcast partnership.

Netflix CEO Reed Hastings has steadfastly insisted that his company and other online content providers shouldn't have to pay additional tolls to Internet service providers, or ISPs, already charging their customers $40 to $60 per month.

Comcast and other broadband providers contend Netflix's growing popularity should require the company to shoulder some of the financial burden for delivering its video. In evening hours, Netflix's U.S. subscribers generate nearly a third of the Internet's downloading activity, according to a research firm.

By early this year, Comcast's streaming of Netflix video had slowed to the point that Hastings felt compelled to pay the toll to retain his company's subscribers.

The special access that Netflix is getting from Comcast is known as "interconnection," a term referring to digital content's journey to an Internet service provider's gates. That path technically isn't covered by the current definition of Net neutrality, which refers to how service providers treat digital content once it's inside the gates.

Comcast has promised to honor the previous rules governing Net neutrality, at least for the next few years. In a blog post last month, Hastings argued that future Net neutrality guidelines should be expanded to address interconnection issues too.

"Without strong net neutrality, big ISPs can demand potentially escalating fees for the interconnection required to deliver high quality service," Hastings wrote. "The big ISPs can make these demands -- driving up costs and prices for everyone else -- because of their market position."

Even with the March improvements, Comcast's delivery of Netflix content lags behind other major service providers. Cablevision, Cox, Suddenlink and Charter each delivered Netflix video at higher speeds than Comcast in March, according to Monday's breakdown. Netflix has interconnection deals with Cablevision, Cox and Suddenlink, although those arrangements don't require Netflix to pay fees.

When Netflix announced its deal with Comcast, both Verizon Communications and AT&T Corp. expressed interest in reaching similar alliances. No deals with Verizon or AT&T have been announced yet.


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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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