In the months since announcing a "mutually beneficial" interconnection agreement, Netflix and Comcast have seen eye to eye on very little. Throw in Comcast's attempt to swallow up Time Warner Cable and grow even larger, and you have a battleground for the two to air their disagreements. Netflix put its opposition to the merger in writing with its most recent earnings report earlier this week, spurring a response from Comcast, and now a pair of more detailed rebuttals from the streaming company (update: and yet another response from Comcast, this time claiming that Netflix itself caused the slowdowns). One is in a blog post by Vice President of Content Delivery Ken Florance, and another is a letter (PDF) by Vice President of Global Public Policy Christopher Libertelli in response to questions from Senator Al Franken. Both argue that Comcast's stance that it deserves payment is flawed because, among other reasons Netflix is still the one that must transmit its data to Comcast's network, where it stops without passing anywhere else.
In Comcast's version of the events, it's Netflix that approached it for the deal, cutting out wholesalers and exercising its market power. The cable giant says Netflix could always go back to working with partners that connect their networks to its backbone instead, and that any issues it has with the Comcast-Time Warner Cable merger apply to the industry, not that deal. To close things out, its position is that Netflix's opposition to the merger is all about enhancing its own negotiating power, and has nothing to do with protecting customers.
From the other side of things, it's completely different, as Florance sees Netflix's payments to middlemen like Cogent, Level3, XO or Tata is necessary because they actually carry its data over long distances to "every network" on the global internet. In connecting to Comcast, Netflix still has to shoulder the load of moving its data to the various endpoints where their networks connect. That, aside from the fact that Comcast serves as sole gatekeeper to the ability to reach customers using its services and is, as Netflix puts it, double dipping by getting paid by end users and Netflix for the same traffic. In his letter, Libertelli says "Netflix purchased all available transit capacity into Comcast's networks from multiple transit providers" and still experienced continually degrading services because Comcast wouldn't upgrade the connections used by those providers as they requested. Once Netflix paid up, its quality increased, and seeing this as Comcast exercising its market leverage, Netflix opposes expanding that power by letting it combine with TWC.
So what's next? So far, Netflix is still pushing other ISPs to join its OpenConnect program to connect networks or provide caching for its content without payment, and it could be some time before the government gives us a decision on the merger. Netflix CEO Reed Hastings referenced the possibility of allowing the merger with "significant settlements in there" during the earnings call on Tuesday, but what those could include is unclear. The FCC's current net neutrality conundrum doesn't extend to the peering agreements discussed here, but the nature of its trust problem over whether ISPs are responsibly managing their traffic is unquestionably entangled in the same conversation. Right now, Netflix customers on Comcast are definitely experiencing a boost in streaming quality and speeds, but that does little for users on other providers facing congestion and if these two stay at odds, who knows how long their deal will last.