Netflix Flexes Interconnection Muscle, But Is It Too Much?

July 17th, 2015 by · 1 Comment

This week, Charter Communications got a key approval for its proposed acquisition of TW Cable. No, the FCC and DOJ aren’t done yet — they’re just getting started.  But Netflix has finished up its own review and is throwing it support behind the deal. It’s not altruism though, but rather the settlement-free peering that Netflix will receive from the combined company through at least 2018.

Netflix has been actively and publicly opposing mega-mergers among last mile providers, seeking to influence their approach to interconnection. Since moving to self-owned content distribution, the company has been very vocal about the subject of course. While they agreed to a paid peering agreement with Comcast to improve speeds for streaming video across its network, they vociferously opposed Comcast’s own attempt to buy TW Cable.

The strategy was so effective that Charter clearly decided the dollars involved in a few years of free interconnection were worth winning Netflix’s seal of approval.  That Charter really, really wants this deal to happen is no secret of course, and paying off Netflix is small change next to the bigger eventual payoff they are aiming for.

But in a new environment where the FCC has claimed the right to intercede in interconnection disputes, I wonder if Netflix ought to consider being a bit more subtle here.

Quid pro quo isn’t exactly uncommon in this type of thing, and last mile operators haven’t exactly been shy about using their gatekeeper position to apply a little pressure. But when they do it, they leave some room for plausible deniability and make sure the light doesn’t shine too directly on it all. The most effective way to blunt your own weapon in negotiations is to swing it a bit too publicly.

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Categories: Cable · Government Regulations · Internet Traffic · Mergers and Acquisitions

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  • Netflix is extremely principled about STRONG net neutrality–we want upstart content providers across the globe to compete on their own merits upon an even playing fiel–err, excuse me, I seem to have just tripped over this sack of money. Nevermind.

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