$CMCSA Throttles $NFLX, Gets Paid
After years of debate, Comcast and Netflix have agreed to stop spinning wheels. Netflix, $NFLX, will pay $CMCSA to directly connect to its broadband network, according to a Wall Street Journal report. The companies announced the agreement in a joint press release Sunday. They did not disclose the financial terms.
Both stocks initially rose on the news. But Netflix fell flat by 10 a.m.
The deal should curb the alleged throttling of Netflix’s streaming video on cable networks. Throttling is the term for ISPs deliberately slowing down certain kinds of high volume traffic.
The reasons for throttling depend on whom is asked. ISPs say they must regulate the rate at which high bandwidth, high demand content is delivered in order to prevent servers from overloading and protect the Internet as a whole. In North America, Netflix and YouTube combined account for more than 50% of download traffic, according to a report by network solutions company Sandvine.
But some consumer advocates have argue that ISPs deliberately slow down high traffic services like Netflix in order to force content companies to pay for the cost of delivering video content. Comcast users had among the slowest download speeds for Netflix content, according to Netflix’s January ranking of Internet Service Providers.
Cashtaggers overwhelmingly argued that the deal was good for Comcast and other ISPs, but bad for content providers. Netflix and other “net neutrality” advocates, such as Google, have maintained that ISPs should not be able to double dip—charging both consumers and content providers for access to their broadband networks. Netflix’s agreement to pay Comcast will likely pave the way for more ISPs to charge fees for high bandwidth services, they say.
— Steven Vargas (@daedalus9042) Feb. 24 at 03:00 AM
— Louis Peters (@louispeters) Feb. 24 at 09:04 AM
Netflix may have had no choice to pay, given Comcast’s recent bid for Time Warner Cable, $TWC. If the $45.2 Billion merger goes through, Comcast will control Internet access for 33 million U.S. subscribers. Investor relief that the company would not ultimately lose Comcast users due to slow download speeds may have driven the stock up in the morning. Some investors may also believe that, by paying the soon-to-be biggest guy on the block, smaller ISPs will not be able to charge lest they lose frustrated Netflix subscribers to Comcast/Time Warner.
But cashtaggers urged caution. If Netflix paid Comcast, it will likely have to give other ISPs something, they said. That could significantly eat into the company’s profits.
i dont c how any1 can spin 2day's $NFLX 'paying up' news as reason to run it up. caution
— Nic (@racernic) Feb. 24 at 09:43 AM
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