Netflix recently agreed to pay Comcast for direct interconnection and thus more efficient delivery of its streaming video traffic, and it appears that other ISP deals could quickly follow.
Speaking on CNBC, Verizon CEO Lowell McAdam said that the two companies were in talks to ink a paid interconnect agreement for direct peering between the two. "It shows you don't necessarily need a lot of regulation in a dynamic market here. Doing these commercial deals will get good investment and good returns for both parties," the executive revealed.
Netflix has always been a thorn in ISPs' sides, accounting for a majority of peak Web traffic on any given day (and 30% of overall Web traffic), but very little of the revenue for the pipe providers. It's also of course a competing service for pay-TV operators, most of whom are those same ISPs as well. This has given rise to a series of disputes over settlement-free peering arrangements. Verizon has been involved in a dispute related to peering and a Netflix backbone provider, Cogent Communications, for several months. Last summer, Cogent accused Verizon of delaying upgrades to the ports through which the two companies exchange Internet traffic.
"Cogent is not compliant with one of the basic and long-standing requirements for most settlement-free peering arrangements: that traffic between the providers be roughly in balance," Verizon said at the time. "When the traffic loads are not symmetric, the provider with the heavier load typically pays the other for transit. This isn't a story about Netflix, or about Verizon 'letting' anybody's traffic deteriorate. This is a fairly boring story about a bandwidth provider that is unhappy that they are out of balance and will have to make alternative arrangements for capacity enhancements, just like any other interconnecting ISP."
As far as net neutrality goes, last month Verizon prevailed in a lawsuit to block the Federal Communications Commission's ability to enforce net neutrality rules. Since then, consumers have anecdotally reported slower video streaming experiences across a variety of providers. While this peering deal doesn't necessarily violate Net neutrality principles, it does point out that OTT can't deliver a quality video streaming service on its own — and big ISPs like Verizon know that and will continue to seek every advantage that arises from that reliance. This has consequences for how the net neutrality landscape plays out in the coming months.