Sunday, February 23, 2014

Netflix Strikes New Interconnection Deal with Comcast

It appears Netflix will pay transit fees, and will not peer with Comcast on a settlement-free basis. Peering without settlement payments traditionally has been used bilaterally when two networks exchange roughly equal amounts of traffic.

Payment of transit fees has been the traditional arrangement when two networks are of unequal size, or traffic flows are asymmetrical, as is the case for Netflix and Comcast. By definition, Netflix primarily sends traffic to Comcast, and receives very little traffic from Comcast.

The new agreement presumably is a transit deal, not a settlement-free peering agreement.

In principle, Netflix likely will have to keep signing transit deals with other large ISPs with huge audiences Netflix wants to reach, as the user-aggregating ISPs will continue to see highly-unequal amounts of traffic delivered by Netflix, and little traffic flowing back to Netflix from the major user-aggregating ISPs.

The transit fees will likely raise Netflix operating costs, though it is not clear by how much.

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