Confirmed: Comcast and Netflix have signed a paid peering agreement

Comcast has agreed to a transit and interconnection agreement with Netflix, as Gigaom first reported on Friday afternoon. While it’s not disclosing the terms of the agreement, Netflix is paying Comcast to connect its network directly to Comcast’s network. Comcast released the following statement:

Comcast Corporation (Nasdaq: CMCSA, CMCSK) and Netflix, Inc. (Nasdaq: NFLX) today announced a mutually beneficial interconnection agreement that will provide Comcast’s U.S. broadband customers with a high-quality Netflix video experience for years to come. Working collaboratively over many months, the companies have established a more direct connection between Netflix and Comcast, similar to other networks, that’s already delivering an even better user experience to consumers, while also allowing for future growth in Netflix traffic. Netflix receives no preferential network treatment under the multi-year agreement, terms of which are not being disclosed.

The big question in this case is whether or not Netflix is paying Comcast, and a source close to the deal confirms that it is. Comcast is not using a Netflix Open Connect box that Netflix uses on some ISP networks to help cache content and cut bandwidth costs for delivering its traffic. Additionally based on the IP address in the traceroute from App.Net co-founder Bryan Berg used that I referenced in our story on Friday, Comcast is getting some consideration. The IP address is a Comcast Business address, which is the unit that handles the paid peering agreements.

Good news for consumers

But for consumers who are looking at this and wondering what it means — such as whether or not they will see better video streams — there are nuances about how the internet works that will govern their end experience. Even with a peering relationship with Comcast (which means now Netflix and Comcast’s networks interconnect at least one point) there are still multiple paths that a user’s request for a Netflix streamed movie can take in traveling around the net. And not all of those paths will be over the direct Comcast-to-Netflix links.

Netflix uses a variety of methods to get its content to the end user, from transit providers like Level 3, Cogent and XO Communications to CDN services such as Limelight or its own Open Connect boxes. So when a customer starts a Netflix stream, the application on their device is going to make a determination about how the client will meet the user’s request. It’s like you deciding if you want a coffee from the Starbucks at the northeast corner of your building or the one a block down on the southeast.

Much like your decision to go to one Starbucks over the other (shorter lines, a barista who is more generous with the whipped cream, the distance), multiple factors come into play when the Netflix client determines the server and route it wants to use. So you might end up traveling over a pathway where the parties directly interconnect (Netflix-Comcast), or where there are more than the two parties but the third-party has a peering relationship with the ISP (Netflix-Level 3-Comcast) or where they don’t (Netflix-Cogent-Verizon). Each option may deliver a different experience.

So while all customers might not get the benefit of Comcast having a direct peering relationship with Netflix all the time, the agreement means that more consumers will likely get a better experience.


Updated: This story was updated throughout to reflect new information and to add clarity.