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Netflix and Comcast Solve Their Web Traffic Problem With a Long-Term Deal

Stream away.

Shutterstock/Sarah Frier Photography
Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

Comcast and Netflix have hammered out a deal designed to remove a bottleneck slowing the video service’s streams for the cable company’s broadband customers.

The deal focuses on the intersection between the two company’s pipes and is supposed to ensure that there’s enough “interconnect capacity” to handle Netflix’s video streams, which can account for as much as a third of the broadband traffic in the U.S.

For the past several months, Netflix has been releasing data that indicated its customers were seeing slower speeds from Comcast and other broadband providers, including Verizon.

The companies aren’t disclosing terms of the deal, but people familiar with the arrangement say that this a “transit” agreement, as opposed to a “peering” agreement, which means that money, or some kind of compensation, is likely changing hands. Comcast and Netflix haven’t finished the engineering process, but it is already evident for some customers. Earlier this week co-founder Bryan Berg found signs of it on his own.

Here’s a statement from both companies, with the very broad outlines:

“Comcast and Netflix 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 pact helps both companies solve, or at least work on, some major issues: Netflix now has a long-term agreement that will help it move its video through the pipes of the country’s biggest broadband provider. And Comcast, which is trying to get political approval for a deal that will give it control of 40 percent of the country’s broadband pipes, gets to tell lawmakers that it’s playing nicely with people who want to use those pipes.*

People familiar with the deal say that it’s been in the works for more than a year and that talks heated up last fall, and then again last month at the CES show in Las Vegas. That is: This wasn’t provoked by the federal court decision striking down net neutrality rules last month or Comcast’s plan to purchase Time Warner Cable, announced this month.

But even if that’s the case (which seems plausible, given the amount of engineering, biz dev and legal wrangling that would be involved) the timing is fortuitous. While peering and transit issues are technically not the same as net neutrality, they fall into the same bucket, in terms of political and business perception. Today’s deal will give both companies the ability to say they’ve got solutions.

Comcast owns NBCUniversal, which is an investor in Re/code.

*The Comcast/Netflix deal would presumably extend to Time Warner Cable subscribers if that deal goes through, though no one wants to talk on the record about that.

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