Netflix, Comcast Remove the Middle Man

Netflix

Netflix users complaining about poor streaming quality and slow speeds will be pleased to note that the company has reached an agreement with Comcast that essentially removes the middle man from the picture. By paying Comcast for direct access to the company’s high-speed network, Netflix has ensured that the high volume of its customers who rely on Comcast will not be hung up on the same issues that have been plaguing them recently.

While terms of the deal are not publicly disclosed as of yet, the arrangement appears to be a smart compromise for both sides. Better quality and streaming speed will appease Netflix’s large customer base and garner the company additional support for its plans to start offering ultra high-definition content later on in the year. On the other side, Comcast is in the process of merging with Time Warner Cable, and this “mutually beneficial” deal with Netflix can only help that process, even if both sides claim the timing is merely a product of coincidence.

Should Comcast’s attempt to buy Time Warner Cable succeed, the combined companies would be the cable provider of nearly half of the country (4o percent), something that  likely influenced Netflix’s motivation for this arrangement to take place. Comcast is also wise to work with Netflix, which is such a formidable presence in the world of internet streaming that it is said to account for roughly one-third of all United States broadband traffic.

While Netflix already had similar direct connections with other companies, such as Cox Communications, the speculation is that this particular deal would have to come at a significantly higher cost considering the size and reputation of Comcast. From Comcast’s angle, however, it appears likely they did offer Netflix a lower rate than they might normally be inclined to, as the bandwidth created by Netflix users is substantial. It is very possible that a similar arrangement could be made with Verizon in the future, as customers from that company have also voiced complaints over streaming speed of late.

Netflix, which boasts over 51 million customers worldwide, provided more than two billion hours of streaming content in January alone, and that was before the release of its critically acclaimed House of Cards series saw its second season get released on Feb. 14. Removing the middle man that previously resided between them and their connection to Comcast should make a huge impact for a significant portion of Netflix customers.

Although the agreement between Netflix and Comcast clearly helps both sides at critical points in the respective companies’ existence, it is still something of a compromise simply because of legal obligations that fall under the “net neutrality” law. This law states that no internet service provider should show any favoritism to certain types of internet data, and that in fact all online content must be viewed equally.

Comcast has stated that no preferential treatment towards Netflix is involved in this deal, and as such, the net neutrality law has been upheld in this agreement. In doing so, the two corporate giants were unable to include everything either side would have liked to, even if doing so would have been more financially lucrative.

By removing the middle man, Netflix and Comcast have figured out a convenient way to make both customer bases happy as well as furthering their respective individual agendas, and in the business world, an agreement like this is about as fair as it gets.

By Spencer Hendricks

Sources:

Bloomberg
Wall Street Journal
New York Times

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