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February 28, 2014

Five things you should know about the Netflix-Comcast deal

(Continued)

— 2. Paid interconnection is already the norm.

The agreement is also not a unique instance of a content company compensating a network operator for interconnection. Numerous types of paid and unpaid connection arrangements are struck, depending on factors such as traffic volume, network reach and performance guarantees. "Settlement-free peering agreements" involve network operators agreeing to mutually exchange traffic without payment. "Settlement-based interconnection" involves one network paying another network for either mutual peering or for transit to the global Internet.

Why would it be more acceptable for Netflix to pay another company, Cogent, for connectivity to Comcast than for Netflix to pay Comcast directly? If anything, a content company connecting directly to an edge network is in the public interest because it avoids susceptibility to a possible outage from peering disputes between an intermediary network and a customer network. Recall that a 2008 Internet outage occurred because of a Cogent-Sprint interconnection dispute. Netflix connecting directly to Comcast circumvents possible outages due to peering disputes beyond its control.

3. This is not a death knell for net neutrality.

The net neutrality issue of whether network operators should be allowed to discriminate (throttle back or prioritize) certain content over other content is separate from interconnection, and the companies' press release states, "Netflix receives no preferential network treatment under the multi-year agreement."

Given the recent ruling on net neutrality and the history of complaints against Comcast for throttling peer-to-peer file sharing traffic, it is not surprising that many conflate interconnection with net neutrality traffic prioritization concerns. This deal would also not be receiving as much attention if there was adequate broadband competition and less media concentration (think proposed Comcast-Time Warner Cable merger). But, to use a physical world traffic example, interconnection is about building new roads and net neutrality is about speed limits and speed bumps on the roads. There is a significant difference between establishing a no-discrimination rule versus regulating who is allowed to connect to whom.

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