Netflix Makes Vague Connection Deal With Comcast

Secretive deal raises concerns about net neutrality, traffic costs for companies.

The Netflix company logo is seen at Netflix headquarters on April 13, 2011, in Los Gatos, Calif.

Netflix has cut a deal with Comcast for direct access through its networks for increased video streaming quality. 

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Netflix has announced it will directly connect its streaming video traffic to Comcast Corp. networks, which means easy downloads for users of the Internet service provider. The bad news is the absence of details on the deal raises questions about whether payment for peering agreements is in the best interests of the net neutrality philosophy that all traffic should be treated equally.

In a brief announcement on Sunday, Comcast said “Netflix receives no preferential network treatment under the multiyear agreement.”

“Working collaboratively over many months, the companies have established a more direct connection between Netflix and Comcast, similar to other networks, that’s already delivering an even better user experience to consumers, while also allowing for future growth in Netflix traffic,” Comcast said in a statement.

Terms of the deal were not disclosed, but The Wall Street Journal reported that Netflix is paying for direct access, which could lead the video service to pay other Internet service providers (ISPs) for similar connections to ensure quality downloads of its popular shows, like “House of Cards.”

[READ: "House of Cards" May Fuel the Net Neutrality Debate]

Such deals, known as peering agreements, traditionally have been free, but ISPs have started requesting payment in recent years as Internet traffic grows, along with the costs of maintaining traffic. Netflix works with content delivery networks to package its data and send it to users but has not previously paid for those services to directly connect with ISPs, the Journal reports.

The issue of peering agreements could draw scrutiny from the Federal Communications Commission, which is rewriting its open Internet rules intended to prevent broadband providers from prioritizing the traffic of groups they favor and charging fees for premium access. Peering agreements were not included in the rules, which a federal appeals court struck down in January.

The appeals court, however, upheld the transparency part of the rules, which requires network operators to disclose how they manage Internet traffic. That part of the order might get more use by FCC Chairman Tom Wheeler, who said last week the commission "should consider ways to make that rule even more effective."

More transparency from ISPs about busy networks could help those companies justify profiting from peering agreements. But because it's hard to say if the deal between Comcast and Netflix will become a precedent for services to pay ISPs for peering agreements, the FCC should press for more details about the deal, says Michael Weinberg, a vice president at consumer advocacy group Public Knowledge.

“I hope the FCC feels comfortable at least shining a light on this,” Weinberg says. “It needs to figure out what is going on and how to construct rules that protect an open Internet.”

[ALSO: Comcast, Time Warner Cable Deal Pauses Netflix Talks]

Republicans, including FCC Commissioner Ajit Pai, are critical of the commission’s open Internet rules as unnecessary regulation that could stifle the free market of the tech industry.

“The Internet was free and open before the FCC adopted net neutrality rules,” Pai said in a statement last week. “It remains free and open today. Net neutrality has always been a solution in search of a problem.”

Comcast’s proposed purchase of Time Warner Cable, however, has aroused scrutiny from both Republicans and Democrats because of the vast ownership of broadband networks it would give the combined company.

House Judiciary Committee Chairman Bob Goodlatte, R-Va., and Rep. Spencer Bachus, R-Ala., issued a joint statement earlier this month saying they will hold a hearing on the antitrust implications of the proposed deal “to ensure that the interests of American consumers and overall competition in the marketplace are protected.”

Without knowing the details of the Netflix deal with Comcast, Weinberg says the prospect of paying for direct network connection could be a bad precedent for video and data providers.

“If I was thinking of making an online video service right now, I would be really concerned about this,” Weinberg says. “If I was thinking about starting an application that transfers data online, I would be concerned about this.”