It was pretty clear that Netflix’s traffic agreement with Comcast wasn’t going to be its last deal with the last mile. But the next provider it seems to have done a deal with isn’t one of the usual suspects. According to reports out of Norway, Netflix has done some sort of deal with Telenor to gain better service.
But at first glance we’re not talking about a paid peering per se. Rather this appears to be simply the payment of rent for server space to put content-laden servers inside Telenor’s network. That sounds more like Netflix’s own OpenConnect ideas, except for the part where they pay for the privilege. But it’s six of one, half-dozen of the other when it comes down to it.
All of this does seem to have been an inevitable result of Netflix’s decision to build its own infrastructure, which itself was a natural evolution as its traffic was outgrowing the CDNs and transit providers it had been using. Cogent would have gone to the mat for them over at Comcast, but Netflix’s pain tolerance isn’t nearly as high. And despite all the logical arguments and talk of economic fairness, the reality is that these sorts of relationships are mostly determined by pain thresholds, egos, and market power.
The attention from the network neutrality folks has made the process quite public thus far. That means we’re getting a front row seat into the development of a new ecosystem where the last mile exercises its muscles upstream from the realm of network neutrality. Will Netflix have to do a deal like this with every incumbent PTT/ILEC around the world, or are there some circumstances where they have more leverage? Seems like a deal with Telenor suggests that plenty of smaller-country incumbents will be able to get similar terms — not that we really have a clue what the terms are for any of these deals.