The deal between Netflix and Comcast does not portend the demise of network neutrality. It may be worse
By G.F. | SEATTLE
THE timing was certainly awkward: on February 23rd Netflix and Comcast confirmed an agreement under which the movie-streaming service will pay the American cable-TV and internet provider for direct access to its network. The news came only ten days after Comcast had agreed to buy Time Warner Cable, another big cable-TV network—a deal that, many worry, will limit competition. And it came only four days after America’s Federal Communications Commission (FCC) had announced how it would go about reformulating rules to keep the internet open.
Yet the deal between Netflix and Comcast does not, as critics hold, portend the demise of network neutrality, the principle that the internet's pipes should show no favours and blindly deliver packets of data from one place to another. Rather, the agreement is part of a development that has been under way for many years and represents a different threat to the free flow of data: changes in how the “interconnection” between networks is organised.
Net-neutrality rules proscribe an internet provider from blocking and throttling (reducing the flow of data) any services, whether it is Netflix, Google Docs or the WhatsApp messaging system, which Facebook has agreed to acquire. It also bans pay-for-play, where network operators open a fast lane for certain services in exchange for payment. Such rules are supposed to prevent dominant carriers from restricting competition for their own services or cutting lucrative deals that benefit one partner while harming that partner's competitors.
This may sound straightforward, but in telecoms regulation nothing ever is. In 2010 the FCC came up with a set of network-neutrality rules, which a court partially voided in January, resolving a suit filed by Verizon, another big American carrier. Yet Comcast is still bound by similar rules: three years ago the firm agreed to comply with them until at least January 2018 to get approval for its acquisition of NBC, a television broadcaster.
These rules provide for two broad exceptions. First, the FCC allows operators to actively manage their networks to keep them running well—as long as the methods to do this are evenly applied and made public. And Netflix’s traffic certainly needs managing: during peak periods—for instance when millions are watching the latest episode of “House of Cards”, its hugely popular television series with Kevin Spacey (see picture)—the streaming service generates one-third of the internet's throughput.
Comcast is under no obligation to make an extra effort to accommodate Netflix’s traffic, as long as it doesn’t do anything that would privilege Comcast's own services or those of its partners. As a result Netflix’s data flood slows down the internet—and its own service: in recent months its subscribers have experienced a marked decline in performance.
The other exception allowed by the FCC’s net-neutrality rules is something known as “peering relationships”. Like a simplified view of the atom, which belies the churning complexity within, most people see the internet as a plug that connects to a digital cloud. Yet the internet isn't one thing, but a digital quilt of millions of separate networks with different speeds. Although any two points on the public internet are able to communicate, the path through which bits of data may pass can be cumbersome and thus slow. Peering means that big networks connect directly, bypassing the vagaries of the larger internet, often at vastly higher throughput rates and lower latency. Tens of thousands of such relationships are in place worldwide—and the main reason why the internet is able to cope with the diversity and volume of traffic that plies across it today.
When two parties exchange about the same amount of data, peering is usually fee-free: both parties have an interest in moving data efficiently in each direction. But when relationships are “asymmetric”, meaning that one party hands over much more data than the other—as is the case with Netflix and other video-streaming services—providers may charge fees.
Yet although such paid-peering relationships comply with the FCC’s definition of network neutrality, they may not be neutral. "One danger is that the deal is bad for big online-content providers like Netflix by forcing them to pay more. Another is that it's actually good for Netflix and bad for the smaller innovators who don't have leverage to enter into these agreements," says Kevin Werbach, a professor at the Wharton School and a former FCC counsel.
Some interconnection experts, such as Dan Rayburn of Frost & Sullivan, a consultancy, have suggested that Netflix will save money in the deal by eliminating middlemen through which it currently connects to Comcast, while also improving its customers' satisfaction with better performance. If true, Netflix isn't being blackmailed into paying a toll, but is instead solidifying its dominant position in the movie-streaming business.
At any rate, the arrangement between Netflix and Comcast shows that net neutrality as defined by the FCC has already become superannuated, as providers demonstrate that managing their clogged networks by necessity and without favouritism leads to the same result as discrimination. Verizon and AT&T are expected to cut similar deals with Netflix. "If we want to protect the future of the open internet,” says Mr Werbach, “we should really be focusing on interconnection rather than broadband discrimination.”
