The breakthrough announced Sunday requires Comcast’s Internet service to create new avenues for Netflix’s video to travel on its way to TVs and other devices. In return, Netflix will pay Comcast an undisclosed amount of money for the next few years.
The arrangement represents an about-face for Netflix Inc., which had steadfastly refused to pay high-speed Internet service providers already collecting $40 to $60 per month from its customers.
Here’s a closer look at what this shift means for subscribers to Netflix and high-speed Internet services:
Question: How will consumers be affected?
Answer: Netflix subscribers relying on Comcast should already be seeing fewer interruptions as video streams over the network. The quality of the picture should be better, too. If the claims of better performance are true, it would reverse how Netflix’s video had been performing on Comcast’s Internet service – the average speed during prime-time viewing hours fell 25 percent from January 2013 to this January, based on Netflix’s own measurements.
Q: What was the problem?
A: That’s a matter of debate. Critics of Internet service providers suspect Comcast and its peers were deliberately slowing Netflix’s video as a negotiating tactic aimed at extracting additional fees. But plenty of analysts traced the slowdown to Netflix’s increasing viewership and the limited number of ports that Internet service providers have built to receive online content.
Netflix has long been hiring third-party vendors such as Cogent Communications Group Inc., Akamai Technologies Inc. and Level 3 Communications Inc. to deliver its video to the doors of Comcast and other Internet providers. Now that it’s getting paid extra money, Comcast is going to create special paths for Netflix’s video.
Q: Comcast says it isn’t giving Netflix preferential treatment. Is this really true?
A: Sort of, but it’s a fine and highly technical distinction.
Comcast is referring to the ongoing debate over “net neutrality,” the idea that Internet providers should treat all digital content equally. Net neutrality governs the performance of bits and bytes once the digital packages are inside the gates of Internet providers. The Comcast-Netflix alliance is limited to how quickly content gets to those gates.
Q: Will Netflix raise its prices to help offset the extra money that it’s paying Comcast?
A: Any future increase probably won’t be tied to the Comcast deal. Though the precise terms aren’t being spelled out, it appears Netflix might just be reshuffling its expenses for video delivery.
In a telling sign that Netflix isn’t expecting dramatically higher expenses, the company didn’t revise its profit projections for the first three months of this year when it announced the Comcast deal. Netflix’s stock climbed by about 4 percent to an all-time high of $449.69 Monday before falling back slightly.