Netflix (NFLX) to Pay Comcast For Access to Its Broadband Network: Report

Netflix (NFLX) has agreed to pay Comcast Corp. (CMCSA) for more-direct access to the company’s broadband system to improve speed and reliability for its video-streaming customers, the Wall Street Journal reported today.

For months Netflix and Comcast have been in a standoff over Netflix’s request its traffic gets served by Comcast directly instead of being passed through an intermediary ; in this case Cogent Communications (CCOI), which was used by Netflix as a primary route into Comcast.

Obviously, sending Netflix users’ streaming content through third party IPs affected quality and speed. Faced with complaints about deterioration in streaming speeds, which according to Netflix data published in January, saw the average speeds of Netflix’s prime-time streams to Comcast subscribers drop to 27% since October, Netflix agreed to pay Comcast anually to deliver its content more efficiently.

Under this new deal, which the Journal said was struck in January at Consumer Electronics Show, and that the details of the agreement were hammered out earlier this month, Netflix will access Comcast’s network directly.

“Under the deal, Netflix won’t be able to place its servers inside Comcast’s data centers, which Netflix had wanted,” the Journal explains. “Instead, Comcast will connect to Netflix’s servers at data centers operated by other companies.”

The deal was confirmed in a joint statement issued Sunday morning:

“Comcast Corporation and Netflix, Inc. today announced a mutually beneficial interconnection agreement that will provide Comcast’s U.S. broadband customers with a high-quality Netflix video experience for years to come. 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. Netflix receives no preferential network treatment under the multi-year agreement, terms of which are not being disclosed.”

The multiyear “paid peering” deal comes just days after Comcast agreed to acquire its closest cable rival Time Warner Cable (TWC) for $45.2 billion, or $159 a share, which if approved would establish Comcast as the dominant provider of broadband in the U.S., serving more than 33 million subscribers.

Netflix, Inc, Comcast Corp. shares closed on Friday at $432.23, $51.05, respectively.

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