To Peer or to Pay: That Is the Question

To Peer or to Pay: That Is the Question

Netflix needs to come up with a better scheme for getting its content to its subscribers, buffer-free. One of the indirect consequences of the Netflix-Comcast deal is that it’s going to be hard to sell Netflix’s Open Connect CDN proposal to other ISPs when Netflix has already ceded ground on the peering dispute to Comcast by agreeing to pay for access.

Netflix CEO Reed Hastings took to his Website’s blog to say that even if Netflix is paying Comcast, it shouldn’t have to. Hastings singled out Comcast, Verizon and AT&T in his blog post. We bet Netflix is currently in negotiations with those latter two over the traffic issues.

The question ultimately comes down to who will pay: -Should ISPs pay to increase capacity or upgrade their networks to accommodate rising demand for HD videos coming from Netflix servers and other OTT sites? ISPs will pass those costs down to their broadband subscribers. Of course, it is the rising demand for HD video streams from Netflix and others that is driving demand for increased broadband speeds – which is a good thing for ISPs.

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Netflix viewers

-Should Netflix pay to use (and profit from) broadband networks it didn’t build nor help maintain? That financial burden, in turn, would be passed down to Netflix subscribers.

The question, then, boils down to which subscribers should pay for increased capacity and network upgrades? All broadband subscribers, or just the Netflix subscribers?

The problem is that if ISPs increase capacity on their networks, all broadband subscribers benefit. ISPs like to say that some Internet users are ok with slower speeds and lower prices. You never hear anyone complain about their Internet being too fast, though. Everyone wants faster speeds.

On the other hand, Netflix should be made to pay for assured delivery only if its subscribers are the only benefactors of the congestion relief. That’s exactly what it has done with the Comcast deal. It has negotiated a more direct connection to its own subscribers via Comcast pipes, and it paid for that access.

The company’s strategy, therefore, has already backfired on it, in two ways:…


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The Online Reporter is the weekly subscription-based strategy bulletin about the enabling technologies of broadband, Wi-Fi, HDR, home networks, UHD 4K TV & OTT services; identifying trends in the Digital Media space. Only a fraction of our material here is published here. To see 4 free copies, follow the links above or go to

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