Netflix Agrees to Pay Comcast for Smoother Service

Netflix agrees to pay Comcast
By: Brian Cantoni

The massive merger of Comcast and Time Warner Cable hasn’t happened yet, and the deal may never go through at all if regulators don’t approve it.  But Comcast is already flexing its muscles in its negotiations with content providers.

In a joint statement, Comcast and Netflix announced they had entered into an agreement under which Netflix will pay Comcast for faster and more reliable access to the cable giant’s subscribers.

This is a major change in the Internet landscape and consumers should beware.  In the past, content providers like Netflix were not required to pay a fee to stream their content to users.  After all, the users themselves are already paying for the data on their monthly bill.  But third party content providers like Netflix use up massive amount of data and their streaming content causes online bottlenecks and traffic jams which result in a poor user experience full of buffering problems and pixelated pictures.  This deal now allows Comcast to charge Netflix a premium for direct access to their broadband network.

Now that Comcast has managed to extract a fee from Netflix, you can bet other cable providers are lining up to do the same.  And that’s a big problem for consumers who always end up getting screwed in the end.  You can bet that other broadband providers like Verizon, AT&T, and Cablevision are lining up and licking their chops at the prospect of extracting their own fees from Netflix.

And as Netflix sees its cost of doing business increase and profits decrease what do you think it will do?

That’s right!  They’ll simply raise prices to pass their added costs along to customers.  Once again the consumer will be the one left footing the bill as the giant corporations get richer.

Of course, now that the precedent has been set you can expect Comcast and other broadband providers to start making the rounds and hitting up other content providers for money.  If they got Netflix to pay, you can be sure they’ll be going after Amazon’s Instant Video service next!

What do you think about the agreement between Netflix and Comcast? How do you think users will be affected? 

Sources: New York Times | Wall Street Journal

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Mike is a freelance writer and blogger who specializes in finance and parenting topics. He is a dedicated husband and father of three who is obsessed with creating multiple streams of income and building wealth so he can achieve true financial freedom for his family. Like what you're reading? Subscribe to our free RSS feed and follow us on Twitter.

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  1. says

    I agree this will probably lead to an increase in monthly price for consumers. Netflix is so entrenched in this space though. While there are a few competitors, I think subscribers for the most part would stomach a price increase and stay with the service. I would.

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