On Feb 23, 2014, Comcast announced a multi-year deal with Netflix aimed at improving the viewer experience of Netflix customers who use Comcast broadband services.
Comcast Press Release
Although details are very limited at this point, the press release states:
…the companies have established a more direct connection between Netflix and Comcast…
There are those who are either concerned that this violates the concept of net-neutrality, or speculate that this is a “game changer” from an internet economics perspective.
In reality, this is an incredibly smart move for Netflix, and a tremendous win for Netflix / Comcast customers.
2.1. The Nature of the Internet
People think about the internet as a cloud, but it’s really a series of interconnected “sub-clouds”.
Each backbone provider, such as Cogent, Verizon, AT&T, Time Warner, and Comcast have their own network backbone (or sub-cloud), and these sub-clouds have peering interconnections, which is why you can get to anything (and anything can get to you) on the internet.
As a subscriber, you pay your Internet Service Provider (ISP), which aggregates multiple connections from your neighborhood, and then multiple neighborhoods, and ultimately, your “internet connection” leads to a data center, and on to the ISP’s backbone network.
Peering interconnections ensure that you have access to content on other provider’s networks. For example, if a provider is on Cogent, they pay Cogent for internet access. Cogent peers with Comcast. Comcast is your ISP. Therefore, you can access the content hosted on Cogent, even though you are a Comcast customer.
2.2. No Guarantees
The delivery of traffic on the Internet is not guaranteed. Each ISP makes its best effort to deliver the traffic.
Normal web browsing is very tolerant of tiny glitches that are normal in the “free-for-all” environment of the Internet – both the protocol (Transmission Control Protocol – TCP) and the browser application are designed to expect a possible failure, and automatically retry.
Streaming protocols, such as those used by voice and video are very sensitive to temporary interruptions. Streaming protocols send the data as fast as possible, and rely on decoding algorithms (Coder / Decoder, or CoDec) inside the browser / video player to interpret the data, as well as both detect and survive temporary glitches.
The dreaded “Buffering” status happens when the content (such as video) plays faster than the rate that the content packets are downloaded to the CoDec. When the CoDec is waiting for more content packets, you get “Buffering”.
The Internet is very much the “Wild Wild West”, and there are no guarantees.
2.3. Quality Means Bit Rate
Video has much more data than voice or web pages that just contain text. The bit rate is the rate at which video must be transmitted, at a given quality, measured in bits per second (bps). Higher-quality video requires a higher bit rate.
Full HD video can require 2Mbps (mega bits per second – 1Mbps is 1,000,000 bits per second) or more. Likewise, if the bit rate drops (meaning, the network can’t keep up with the required bit rate), then the quality drops.
Video services such as Netflix attempt to monitor the bit rate to provide the highest-quality experience possible, but they also automatically downgrade the quality if the bit rate drops – the lower-quality video stream doesn’t require a high bit rate, meaning fewer packets have to be downloaded in order to keep the bit rate constant.
Higher bit rate means better quality, lower bit rate means lower quality.
2.4. Content Delivery Networks
Content Delivery Networks (CDNs) are loosely-affiliated interconnections, allowing content providers to widely publish content to servers on a specific ISP sub-cloud, and in turn, share content from the content provider directly to the ISP’s customers without using peering interconnections.
CDNs make the internet more efficient.
2.5. Net Neutrality
Network (Net) Neutrality is the concept that all traffic is equal. No content provider’s traffic is prioritized over any other provider. ISPs are incented toward Net Neutrality because customers who can’t access desired content could simply pick another provider. Likewise, content providers can switch ISPs.
Neutrality levels the playing field.
2.6. Peering Has its Limits
Peering interconnections between “sub-clouds” are hosted in specific data centers, and there are typically multiple, geographically-disparate peering points spread throughout multiple data centers, assuring that if one data center or link were to fail, the traffic could be easily routed through another data center or link.
Peering connections are often a bottleneck — they are sized to accommodate “normal” traffic between the two networks. When a content provider has unusually-popular content, this can create an asymmetric relationship, where the data flowing from the provider to the ISP’s customers across the peering connection, exceeds the bandwidth (limit) of the peering connection.
Shallow peering connections can constrain bit rate, when multiple users access the same content. Each copy of the content must be streamed across the peering connection, aggregating the total amount of bandwidth required. As the peering connection “fills up”, everyone’s bit rate drops, and reliability becomes spotty.
CDNs allow direct access to the content, avoiding the peering connection bottleneck.
3. Comcast and Netflix
Netflix uses the Cogent network for hosting and delivery. Peering between Cogent and Comcast is limited, affecting quality and reliability for Comcast users who subscribe to Netflix service.
As the popularity of Netflix has increased, the number of concurrent sessions on all networks has increased.
Netflix had the same problem, recently, with Verizon. Verizon wanted Netflix or Cogent to help pay for upgrading the peering entry points in to the Verizon network.
While details about the Comcast deal are limited, this specific statement in the press release hints at the technical nature of the deal:
…the companies have established a more direct connection between Netflix and Comcast…
The Comcast press release also states:
Netflix receives no preferential network treatment under the multi-year agreement…
These statements hint at a solution in which, either Netflix (in Cogent data centers) have direct access to the Comcast network, bypassing existing peering connections, or Netflix has established content delivery directly within one or more Comcast data centers.
In either case, the multi-year agreement simply means that Netflix is paying for bandwidth, co-location, or both – the same as any other ISP agreement.
There has been significant criticism of the Netflix-Comcast deal, from sources that don’t seem to fully understand it.
4.1. False: Netflix-Comcast Deal Appears to Violate Net-Neutrality
The Comcast press release states explicitly that “Netflix traffic receives no preferential network treatment”. Meaning, neither at the peering connection, nor in the Comcast network, is Netflix receiving any explicit benefit over any other traffic.
If Comcast were prioritizing Netflix traffic across existing peering connections, or across the Comcast network, that would violate Net-Neutrality.
Either as a function of connectivity, or through its CDN, Netflix is paying for direct access in to the Comcast network.
4.2. False: Netflix-Comcast Deal is a Game Changer
Some folks seem to think that this is a pay-for-play deal, where Netflix must revenue-share with Comcast. That would be a less-than-ideal situation for both parties.
From a Comcast standpoint, users can switch to another provider. This could be facilitated by a friendly Netflix message that says “Sorry about your terrible experience, blame Comcast” (Netflix can easily use the first few numbers, called “octets” of your IP address to determine if you’re a Comcast customer). It’s in Comcast’s best interest to strike a fair deal with Neflix.
Netflix has apparently started posting a message to Verizon users who experience buffering:
This resulted in a cease and desist from Verizon… Read more here.
Again, this is a very smart move for Netflix. Putting the blame and the burden back on the ISP creates visibility, and helps support net neutrality.
Further, if Comcast intends for all content providers to enter in to a pay-for-play arrangement, they risk losing access to content from providers who won’t pay, which is a greater incentive for their users to switch (or for the content providers to go in to the ISP business). This is one of the tenets of Net-Neutrality.
From a Netflix standpoint, why share revenue points for zero value-add? It’s in Netflix’s best interest to strike a fair deal with Comcast ONLY for services rendered. Likewise, without preferential treatment (which we know is excluded from the deal), arbitrary revenue-sharing essentially gives Netflix’s competitors a leg up, because they won’t have the pay-for-play penalty.
Netflix would have only come to the table for a tangible benefit.
4.3. False: Comcast is Double-Dipping
Comcast already charges its users for internet access, why is it charging Netflix to deliver the traffic?
The simple answer is that Comcast is charging Netflix for hosting and / or internet access, just as it would for any other customer.
Netflix is paying for internet access, not delivery.
5. The Reality
5.1. There is no such thing as a free lunch.
In some situations, it makes sense for CDN arrangements between ISP and content provider to be low cost or marginal cost – depending on the type of content, it may even make the ISP netork more efficient, and therefore, a business case exists to provide access for the content provider for free.
This equates to table scraps compared to the amount of traffic from Netflix.
When the resources required for a CDN arrangement become a direct cost, it makes sense for the ISP to charge for service.
5.2. Benefits for Comcast
- Netflix is now a customer. Comcast enjoys the additional revenue, which among other things, offsets infrastructure costs.
- Big win for Comcast users. Comcast is providing a huge incentive for its users to stay put – they want faster, better-quality Netflix service, and Comcast has delivered. Switching providers means they risk degraded access to Netflix.
- Other Cogent traffic gets a boost. Without Netflix clogging the peering connections between Cogent and Comcast, other sites and services hosted on Cogent get a perceived performance boost for Comcast users.
5.3. Benefits for Netflix
- Direct access. Netflix customers now enjoy a more direct path to Netflix content, ostensibly with better reliability and sustained bit rate.
- Diverse access. If there is a problem on the Cogent network, Netflix could potentially leverage Comcast peering with other ISPs to deliver uninterrupted service to its customers.
- Scalability. Leveraging multiple networks / datacenters allows Netflix to scale more quickly while maintaining high quality. Quality is a huge driver of value – scaling at the expense of quality means that value suffers.
- Fixed Cost. Predictable infrastructure spend.
Due to the brief details available, many people have made some possibly-incorrect assumptions about the Netflix-Comcast deal.
From the details that are available, it seems like a smart move for both parties, and the customers benefit.