On Monday during a call with investors, CEO of Verizon Communications Lowell McAdam said heavy Internet data users must defray the online bandwidth burden via network upgrades. The deal would allow Netflix subscribers to enjoy faster speeds for streaming TV and movies.
“We are pleased to see Netflix and Comcast agree on an arrangement,” he said during the call. “And we have had discussions with Netflix ourselves.”
McAdam said the two companies had been in talks since last year (via Reuters):
These deals hinge on whether Netflix can set up direct access to Verizon, known as an “interconnect agreement,” rather than go through a third party. Verizon provides millions of U.S. customers with its FiOS broadband service and Netflix speeds have slowed on that network in recent months, leading to complaints.
AT&T spokesman Mark Siegel said in a statement on Monday that “we’re in discussions with Netflix to establish a more direct connection between our networks, similar to agreements we have with others, so that AT&T broadband customers who use Netflix can enjoy an even better video experience.”
The idea behind improving access through cable providers makes sense on the surface (via CNET) — especially considering that Netflix is one of the largest content providers on the Internet:
Video traffic on the Internet, like the service that Netflix runs, is very sensitive to delays. As a result the Internet is built in such a way that content is distributed throughout the network in what’s known as content delivery networks, or CDNs. These services strategically place servers throughout the Internet and then they cache certain content, like streaming video, on these servers, so that when customers request a particular video it can easily and quickly be delivered to them. This reduces overall traffic on what’s known as the Internet backbone. And it results in a more efficient use of network resources. It also greatly improves performance and quality of service.
NFLX stock is up more than 3% since yesterday, and closed at a record $447 on Nasdaq.