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With Netflix deal, Comcast hangs 'Kick Me' sign on net neutrality

If you’ve never really grokked what the lack of net neutrality would mean for the Internet, Comcast and Netflix provided you with a handy object lesson on Sunday.

The Internet service provider and the streaming video service announced on Sunday that they had struck a deal that speeds up streaming of Netflix content into the homes of Comcast subscribers. In a joint statement, Netflix and Comcast hailed this “mutually beneficial interconnection agreement” that provides “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.”

And all Netflix had to do is pay up for the privilege. That’s according to the Wall Street Journal, which first got wind of the Netflix-Comcast deal on Sunday. The Journal says that Netflix gets direct access to Comcast’s broadband network in exchange for a payment to the cable and Internet provider. (Neither Netflix nor Comcast outlined terms of the deal in their public announcement.) What’s more, the Journal says, Netflix’s Comcast arrangement “could set a precedent for Netflix’s dealings with other broadband providers.”

Netflix certainly has plenty of incentive to pony up. Comcast falls near the bottom of Netflix’s rankings for which ISPs deliver the best streaming experience to its subscribers, and less than a week ago, Netflix groused that streaming performance for its service on major ISP networks was getting worse.

In that sense then, Sunday’s announced deal is good for Netflix in that it can promise improved performance on the nation’s largest cable provider to its subscribers. It’s certainly a good deal for Comcast, which not only stands to get some money out of Netflix but has the muscle to extract similar arrangements with other streaming services. And it may even work out all right for Netflix subscribers on Comcast who can look forward to better performance for their buck—assuming that the streaming service doesn’t pass on the cost of the agreement to them, of course.

But for the Internet at large, the Netflix-Comcast agreement has some troubling implications, with many commentators on Sunday calling it the latest sign that the concept of net neutrality is dead and buried. Net neutrality is the idea that ISPs treat all Internet traffic the same, neither blocking the delivery of data packets nor giving priority to some types of data over others. Last month, an appeals court struck down the Federal Communications Commission’s net neutrality rules, and some of the starker consequences of that ruling seem to be born out by Netflix’s Comcast deal—namely that ISPs will start charging companies for better access to their networks, creating a tiered system that squeezes out smaller players who can’t afford to meet the ISPs’ asking price.

If the implications of Sunday’s announcements are troubling, so is the timing. Earlier this month, Comcast announced plans to buy Time Warner Cable in a $45.2 billion deal that would extend the Internet and cable provider’s already considerable reach. (Time Warner is the second-largest cable provider after Comcast in the U.S. and the third largest broadband provider.) Should that deal go through—and consumer groups are very much opposed to it—Comcast would have even more muscle to extract concessions from the Netflixes of the world.

The FCC says it’s not challenging the court ruling that cut off net neutrality at the knees, instead focusing its efforts on crafting a new version of the rules that better stand up to legal challenges. The FCC was planning to come up with its revised rules by the summer; look for Sunday’s Netflix-Comcast pact to provide the agency some extra incentive.

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