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Summary:

Verizon just became the second ISP to get paid by Netflix for direct peering with the video service. This should lead to faster Netflix streams for Verizon customers, but possibly also more disputes about peering.

netflix 4k feature

Netflix CEO Reed Hastings may really hate the peering deal he signed with Comcast, but that didn’t stop him from entering a similar partnership with another ISP: Verizon and Netflix have also agreed on a paid peering relationship.

News of that pact was first broken Monday afternoon on by BTIG Research’s Walter Piecyk, who tweeted Monday afternoon that Verizon CEO Lowell C. McAdam had confirmed the commercial relationship between the two companies.

Netflix has since confirmed the agreement, with a spokesperson telling us via email:

We have reached an interconnect arrangement with Verizon that we hope will improve performance for our joint  customers over the coming months.

A Verizon spokesperson also confirmed to Gigaom that both parties have reached a deal, but wasn’t able to offer any further details.

Netflix entered a paid peering deal with Comcast in February after Netflix subscribers saw average streaming speeds over Comcast’s network decline for months. Under the deal Netflix is paying Comcast money to facilitate direct interconnection between the video service and Comcast’s network.

Comcast customers have seen significant Netflix streaming quality increases as a result. Verizon has also been trailing other ISPs in terms of Netflix streaming performance, ranking 15th on Netflix’s latest ISP speed index. Here’s how Netflix streams have been performing on average for Comcast’s and Verizon’s customers over the last few months:

verizon and comcast netflix speeds

However, Netflix has been very vocal about the fact that it doesn’t think that it should pay ISPs for peering. The company called on the FCC to take on peering, and it publicly accused Comcast of abusing its market power to pressure content services on peering fees. This resulted in a bit of corporate back-and-forth, with Comcast claiming that it willfully let its customers’ streams slow down.

Netflix’s strategy to deal with streaming quality and peering fees was originally focused on OpenConnect, its own content delivery network. The video service has struck deals with some U.S.-based and a number of international ISPs that have led to Netflix deploying caching boxes inside the ISPs’ networks. However, the biggest U.S. ISP resisted this idea and instead called on Netflix to pay for peering, a strategy that seems to have worked for Comcast and Verizon.

Next up for such a deal could be AT&T: Netflix publicly criticized AT&T streaming speeds in its most recent letter to shareholders, and AT&T Mobility CEO Ralph de la Vega said in March that his company wants Netflix to pay up as well.

  1. Isn’t ‘peering’ the wrong term here? Netflix is paying for access to Verizon customers (who are also paying for access to Netflix…), not for transit.

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    1. It’s “paid peering”… Transit usually refers to receiving a full routing table (i.e. you’re able to send traffic to any destination). “Peering” typically refers to (only) the routes “behind” a given peer (i.e. their customers) plus their own. This can be in the form of a settlement-free arrangement (i.e. neither side pays the other for traffic flowing between the two networks), or a settled/paid peering, where one side pays the other.

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  2. Peering is between tier 1 carriers. In this case, netflix is a customer with direct connect.

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    1. Demetri J. Mouratis Monday, April 28, 2014

      Not so, Mo. Peering may be done between any two networks, either free or paid.

      http://drpeering.net/white-papers/Ecosystems/Internet-Peering.html

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  3. If this goes on, it will only move Netflix more towards thinking of P2P technologies within its solution. It will gain from it a reduction in its bandwidth and compute costs on AWS and a reduction (or elimination) of its peering agreement costs.
    This can be achieved by looking at technologies like WebRTC and the companies that already offer the relevant capabilities and infrastructure: http://bloggeek.me/netflix-webrtc-usecase/

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  4. matias magallanes Tuesday, April 29, 2014

    Peering is between tier 1 carriers. In this case, netflix is a customer with direct connect http://howtogetamericannetflix.tv

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  5. edmundsingleton Wednesday, April 30, 2014

    My my, Netflix subscribers will be able to view movies flawlessly while the women down the street reviewing on line her medical records with her doctor is being buffered…

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