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Netflix Pays Comcast To Ensure Its Videos Stream Smoothly


Netflix is hoping that a deal it has struck with Comcast will mollify some of its unhappy customers. The company announced yesterday that it will pay to connect Comcast's broadband network more directly. That means Netflix customers should get faster, smoother access to programs like "House of Cards." The deal could serve as a model to help the company resolve disputes with other big Internet service providers.

NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: With its popular video streaming service, Netflix has been growing at a dizzying speed. On some nights, its programs are said to be responsible for more than 30 percent of the traffic on the Internet. But as the company has grown, many customers have complained about buffering and service interruptions. And Netflix has been anxious to address their concerns. Tim Wu is a professor at Columbia Law School.

TIM WU: I think Netflix felt it was under serious threat of having its programs be nearly unwatchable. I think what Netflix wants to accomplish is, you know, videos that are playable, business as usual.

ZARROLI: Netflix has complained that the service interruptions are the fault of the big Internet service providers such as Verizon and AT&T. And Netflix says it wants upgrades that would ensure its customers better service. But Netflix and the big ISPs have been waging a bitter fight over the cost of these upgrades. The two sides have been locked in a stalemate but with the deal announced this weekend, Netflix has managed to come to terms with the biggest ISP of all. Ken Doctor is a media analyst at Outsell.

KEN DOCTOR: I look at this deal, which allows Netflix to move more quickly through the Comcast pipes to American households, as removing impediments for both companies.

ZARROLI: Doctor says one reason Comcast has reached an agreement when other Internet service providers like Verizon haven't may be its big pending merger with Time Warner Cable. The deal has to be approved by the federal government. Any protracted fight with Netflix, as well as a flurry of complaints from would-be viewers, wouldn't look good to regulators.

DOCTOR: You want to be able to say, even though we're the biggest company in broadband in the country with about 40 percent after the Time Warner deal, we can work through these problems, that size is not a problem.

ZARROLI: In fact, critics say this weekend's deal already raises questions about the kind of market dominance that a company like Comcast has. John Bergmayer, a senior staff attorney at Public Knowledge, says the problem isn't so much that Netflix is having to pay Comcast for network access. He says someone has to pay for upgrades. But Bergmayer says the sheer size of companies such as Comcast and Verizon gives them a huge amount of power at the bargaining table.

JOHN BERGMAYER: Are they simply charging for the connection itself, which might not be a problem, or are they charging - basically holding their customers hostage and charging for access to their users as opposed to charging for, you know, the reasonable cost of upgrading the network?

ZARROLI: Neither Netflix nor Comcast would reveal the terms of the deal they announced this weekend, so it's not clear how much money is changing hands between them. But with its huge customer base, Comcast is in a strong bargaining position with anyone seeking access to its network. The pending merger will give federal regulators a chance to decide whether allowing it to grow even bigger is a good idea. Jim Zarroli, NPR News, New York.

SIEGEL: You're listening to ALL THINGS CONSIDERED from NPR News. Transcript provided by NPR, Copyright NPR.

Jim Zarroli is an NPR correspondent based in New York. He covers economics and business news.