SAN JOSE -- Netflix and Comcast annnounced a deal Sunday to speed up the delivery of movies and television shows to millions of customers. The stunning agreement could usher in a new era in the relationship between content providers like Netflix and the companies, like Comcast, that own the Internet's "pipes."
While the new arrangement was reportedly settled at a Vegas sit-down between top executives, what probably won't be settled for a while is the brewing argument about new powers won by high-speed Internet service providers over what Americans can see on their personal screens in the future.
While not directly connected to the issue, the deal comes amid a renewed debate over so-called "net neutrality" rules for companies like Comcast, which were eliminated by a federal court in January. Basically, the rules leveled the playing field for all content providers -- new and old, big and little -- wishing to get their videos to customers via the Internet "pipes" owned by cable and satellite companies.
Advocates of net neutrality worry that cable and satellite companies might gouge content providers for faster and smoother service, forcing customers to eat a share or all of the price increases. They also fear that some cable and satellite giants would block certain Web sites and favor movies and television shows produced by their subsidiaries or partners.
"We now have an Internet service provider telling content providers that the only way its service can work is if you pay an extra fee," Michael Weinberg of Public Knowledge, an advocacy group, said to USA Today about the Netflix/Comcast pact. "The Internet service provider is injecting itself into the relationship between Netflix and its customers."
"I'm not sure this is as nefarious as people are making it out to be," said Matthew Prince, CEO of CloudFlare, in reference to criticism that the deal was really Comcast forcing Netflix to pay a premium to get smoother and better delivery of streaming services.
"It is likely, given Netflix's scale, they were able to negotiate a favorable rate," said Prince, whose San Francisco company helps content-providers like Netflix get their videos to customers.
Reached by telephone Sunday, Netflix and Comcast spokesmen described the deal as a winner for their mutual customers.
"They are going to be getting a better experience," said Netflix spokesman Joris Evers meaning smoother delivery of streaming content. His counterpart at Comcast, Charlie Douglas, added, "Some may already be seeing it happening."
While a Comcast press release stated that Netflix "receives no preferential network treatment," neither company offered specifics about the deal. They did not say how much Netflix agreed to pay for enhanced streaming, for how long, or what types of improved services are involved.
Besides their mutual competitors, another group that would be interested in the details of the pact would be federal regulators and national legislators who intend to bring neutrality back to the Internet sooner than later.
Until two years ago, Netflix had relied largely on middle-men, "content delivery" companies, to send its video traffic to Comcast, AT&T and other big cable or satellite companies. Then Netflix and Comcast connected their networks directly, but the resulting streaming was less than satisfactory to Netflix. It is believed the new deal will eliminate these performance problems.
According to a New York Times report Sunday, the agreement was forged in a meeting between Brian L. Roberts, chief executive of Comcast, and Reed Hastings, the chief executive of Netflix, at the International Consumer Electronics Show in Las Vegas last month. Measured by customers and megabits, the two partners are the largest of their kinds, and their relationship stands to grow if Comcast's $45 billion bid for Time-Warner Cable is approved.
Comcast/Time Warner would control about 38 percent of the high-speed Internet market, with 32 million broadband customers. Meanwhile, Netflix's 33 million or so subscribers in the United States generate nearly a third of North American web traffic from broadband.
Matthew Prince of CloudFare said it's likely that Netflix will pay less to Comcast than it was paying a middle-man company to do the same thing.
"While this is being cast as a network neutrality issue, I think that's inaccurate," Prince said. " The news today is not a watershed moment but rather a logical step that likely decreased Netflix costs and allowed them to provide better service to Comcast customers."