Netflix (NASDAQ: NFLX ) has been making headlines all year by inking interconnection deals with Internet service providers, allowing greater network access to improve streaming quality. Apple (NASDAQ: AAPL ) may be doing likewise, according to industry insider Day Rayburn. Apple is reportedly negotiating interconnection deals with several large domestic ISPs, yet Apple has not complained publicly about having to pay these fees like Netflix has.
In fact, interconnection deals are quite common in the industry, with companies like Microsoft, Google (NASDAQ: GOOG ) (NASDAQ: GOOGL ) , Facebook, and Pandora Media having similar arrangements, among many others. For most companies, interconnection fees are simply a cost of delivering content via content delivery networks, or CDNs. Apple is likely building its own CDN to replace third-party providers like Akamai and Level 3, but it'll be a long time before it has a CDN up and running.
Google doesn't charge interconnection fees for Google Fiber, and offers free access for delivering content. However, Google can afford to be more aggressive since Fiber is a tiny side business.
In this segment of Tech Teardown, Erin Kennedy discusses interconnection deals with Evan Niu, CFA, our tech and telecom bureau chief.
(Relevant segment starts at 9:10)
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