netflix to pay time warner
August 21, 2014

Netflix Is Paying Time Warner For Faster Video Delivery, Completing The Big Four ISPs Set

John Hopton for - Your Universe Online

It is an issue that has gone beyond the behind-the-scenes wranglings of the companies that bring us our information and entertainment, and has aroused much public discussion as well as political debate. Should ISPs be paid by big online companies for greater access to networks and a faster delivery of content, particularly if the companies account for huge percentages of traffic? As of this week, it has been reported that Netflix is now paying all of the big four ISPs in the US.

Having already signed deals with Comcast, Verizon and AT&T, a Netflix statement posted on August 19th confirmed the company had reached an “interconnection agreement” with Time Warner to enable customers to receive Netflix content in a high quality and timely manner - the content being, of course, largely videos.

The deals may at first sound like power-enhancing moves which benefit the businesses involved, but there are a lot of complicating issues. From a customers’ perspective, they may see a better service from the incredibly popular Netflix, but there is a fear that ultimately they could see increased charges, particularly if the ISPs decide to gradually increase what those such as Netflix pay and the increases are passed onto customers.

There are also concerns connected to the net neutrality debate. The Federal Communications Commission (FCC) is currently listening to the public who are contacting them in great numbers, as well as having roundtable discussions in Washington in the coming weeks. One issue at stake is whether arrangements like the ones between Netflix and the ISPs constitute such a threat to Internet equality that they must be subject to a change in regulation. There is concern that smaller online players and potential new businesses will be left at a disadvantage, and President Obama and the New York Times have both spoken about urging protection of fairness on the Internet.

However, is not necessarily a case of Netflix trying to resist political and public pressure in order to progress its business, nor of ISPs simply looking for new sources of revenue. There is an argument that given how much of a network is used by vast services like Netflix, perhaps they should be contributing something more than those who use less. A study conducted by research firm Sandvine last year found that Netflix and Google-owned YouTube together accounted for 50 percent of all Internet traffic. Netflix alone accounts for around one third of all Internet traffic every evening and weekend, according to telecommunications industry analyst Jeff Kagan.

Netflix is not at all keen on having to make the deals it has made, and has been at odds with the ISPs. In an op-ed on Wired and quoted by PC World, Netflix CEO Reed Hastings said, "We'll never realize broadband's potential if large ISPs erect a pay-to-play system that charges both the sender and receiver for the same content. That's why we at Netflix are so vocal about the need for strong net neutrality, which for us means ISPs should enable equal access to content without favoring, impeding, or charging particular content providers. Those practices would stunt innovation and competition and hold back the broader development of the Internet and the economic benefits it brings.”

Hastings also said that “Network limitations are largely the result of business decisions to not keep pace with subscriber demand in a world where the Internet increasingly is the main vehicle for all kinds of entertainment, from gaming to movies to video chats with loved ones.” A point which counterbalances the argument that entities like Netflix hog a network. We are told that Netflix “reluctantly” agreed to pay the big ISPs in the US, and that 99 percent of their arrangements worldwide involve no such payment.

While these conflicts are going on, the public at large are affected not only by potentially higher fees and reduced Internet equality, but at times by lower quality output. As Peter Suciu said on redOrbit, “Any Comcast subscribers who streamed the second season of the Netflix original series House of Cards may have noticed that the video quality wasn't quite up to expectations,” while Verizon and Netflix have publicly blamed each other for stalling streaming services in recent months.


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