Comcast and other broadband providers argued Netflix's growing popularity should require the Los Gatos, Calif., company to shoulder some of the financial burden for delivering its video. In evening hours, Netflix's 33 million U.S. subscribers generate nearly a third of the Internet's downloading activity, according to the research firm Sandvine.
Now that Netflix has relented to Comcast, the largest U.S. broadband service, similar deals are more likely to be reached with other Internet providers such as Verizon Communications Inc., AT&T Inc. and Charter Communications Inc.
Here's a closer look at what this shift means for subscribers to Netflix and high-speed Internet services:
HOW WILL CONSUMERS BE AFFECTED?
Netflix subscribers relying on Comcast should already be seeing fewer interruptions as video streams over the network. The quality of the picture should be better, too. The improvements started to appear Thursday when Comcast and Netflix began working together, though their collaboration wasn't revealed until Sunday. Some analysts believe the alliance might set the stage for Comcast to eventually include an application for Netflix's service on its cable-TV boxes, making it even more accessible.
If the claims of better performance are true, it would reverse how Netflix's video had been performing on Comcast's Internet service — the average speed during prime-time viewing hours fell 25 percent from January 2013 to this January, based on Netflix's own measurements.
WHAT WAS THE PROBLEM?
That's a matter of debate. Critics of Internet service providers suspect Comcast and its peers were deliberately slowing Netflix's video as a negotiating tactic aimed at extracting additional fees. But plenty of analysts traced the slowdown to Netflix's increasing viewership and the limited number of ports that Internet service providers have built to receive online content.
Netflix has long been hiring third-party vendors such as Cogent Communications Group Inc., Akamai Technologies Inc. and Level 3 Communications Inc. to deliver its video to the doors of Comcast and other Internet providers — as if Netflix had been hiring a fleet of delivery trucks to transport its products to a store. As more people stream Netflix video, the company had to dispatch more trucks. Meanwhile, other Internet services also were sending trucks with their merchandise.
Like any congested highway, bottlenecks were slowing traffic down as all those trucks carrying digital content tried to get into the entry gates of Internet providers.
Now that it's getting paid extra money, Comcast is going to create special roads for Netflix's video. By bypassing the bottlenecks, Netflix video should stream more smoothly for Comcast subscribers.
IS NETFLIX THE ONLY SERVICE WITH EXPRESS LANES FOR DEDICATED CONTENT?