It’s AT&T’s Turn, Netflix Signs Another Interconnection Agreement

July 30th, 2014 by · 5 Comments

Netflix and AT&T have apparently made an interconnection pact, following the same path as we have seen over the past two quarters with Comcast and Verizon. Perhaps this time will be a little less acrimonious, as the two plan to have the necessary connections in place ‘over the coming days’.

This year the relatively sedate topic of paid peering has taken on a rare, very public persona. Last mile operators have chafed against Netflix’s video content as the OTT provider builds out its own CDN infrastructure. Interconnection speeds have fallen and the blame has been cast all over the place.

Caught in the middle of the increasingly caustic dispute have been the IP transit backbones Netflix has used to reach customers when no peering agreement was in place. Connections have gone without upgrades, streaming has buffered, and tempers have frayed. While they have been working through the same issues, Netflix and AT&T have done so a bit less dramatically than we saw with Verizon and Comcast.

The FCC has been taking a look at the whole peering/transit ecosystem, however I seriously doubt they will do anything other than quietly warn everyone not to make them intervene. Now that Netflix has most of the bigger interconnection deals in place, it is possible that peering and interconnection will receded back into the shadows where such relationships usually live.

There can be little doubt that the balance of power in interconnection has shifted to the last mile. But perhaps we’ve also seen the limits of that power, or at least the basis upon which it can be challenged by the content world.  Netflix’s public agitation for free interconnects for all may have been nonsensical, but a little sunlight goes a long way.

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Categories: Content Distribution · ILECs, PTTs · Internet Traffic

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5 Comments So Far

  • fkabluejayb says:


    Can LVLT (after the TWTC merger) do this same deal with NFLX?

    • Anonymous says:

      Even if TWTC had enough broadbad residential customers to command such a deal (which I don’t think TWTC does), LVLT would never do it. They’d lose 100% of their credibility with the FCC on the net neutrality debate. LVLT has far more IP Transit and hosting revenue at risk from the content community if they lose the net neutrality battle, than they would gain from charging NFLX.

    • Anonymous says:

      Why would they? Isn’t LVLT one of the transit providers for Netflix?

      TWTC is not the same entity as Time Warner Cable.

  • CarlK says:

    At a minimum, speeding up netflix connections to end users demanding such –increasing throughput from content creation through middle mile providers including LVLT–validates the new t.v. paradigm away from bundled services via direct streams over the internet. This equates to individual channel choosing with consumers in charge over what they want to see where and on what gadget, and when they want to see it without interference from gatekeepers.

    Irrespective of comments on this board by its owner, there are others with clout continuing the fight against these oligopolists raising toll roads, and that won’t stop the trend from continuing, especially the trend of jettisoning bundled pay t.v. services. Thinking that the settlements being made with netflix places this issue on the back burner, is fool fodder to be sure. That’s not how revolutions are won!

    As for LVLT cutting a deal with netflix like those dictators inside the last mile, now that those last mile gatekeepers’ margins have been expanded unnecessarily, maybe LVLT can raise their prices in kind for IP transit and other services to those gatekeepers directly?

    Maybe as bluejay alludes to, the building additions that twtc brings as part of the LVLT Network will provide more owned and controlled interconnection access points for increasing prices to netflix, although that would very much be counter to LVLT’s overall position on how they expect or believe the internet should evolve, unless there becomes factual costs that are burdensome which must be paid for.

    Whatever the cases may be, Level 3 and their soon to be added acquisition target, twtc, will continue to thrive in this environment.

    Regarding twtc, this board’s guru has yet to vet their numbers after market which appear very healthy on the surface. What I have considered to be a slow top line grower in the past, is fast morphing into a double digit top line grower on the higher margin communications services that will matter when they become part of LVLT.

    In the meantime, my much earlier $40 LVLT price target has been attained, with my revised $50 target close on the horizon, so it’s high time for a price target raise on LVLT shares to $60 before year end.

    “It’s so simple” when growth becomes real instead of empty pipe dreams expected to be consumed by “white mice.” You can ask Ms. Donna Jaegers about that.

    Carry on RAMBLERS!

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