The gloves are off and a battle is raging between Comcast and Netflix. Both traded blows in corporate blog posts today making highly charged statements essentially calling each other liars. To say that the corporate-speak gloves are off is not only an understatement it is a colossal one. If words were swords, Comcast and Netflix would make the violence on Game of Thrones look like a spitball fight and Frank Underwood’s murderous ways seem like cartoon shenanigans.
We’ve been talking quite a bit about issues that affect the video content you stream and how that might affect the costs you pay. It looks like that conversation is going to continue for quite some time. Whether it be about the FCC and its proposed Open Internet Rules changes, or the relationships between content companies and the broadband pipe owners that bring the streams to your screens, the issues are related, tricky, and fraught with the potential for changing how we stream content and how much we pay to do so.
A few days ago we talked about the beginnings of this new war of words when Netflix said in its earnings report that it was not in favor of Comcast’s proposed acquisition of Time Warner Cable. Netflix’s reason? A much larger Comcast would have too much leverage to set prices for content providers and customers. This came after Netflix and Comcast had reached an agreement for Netflix to pay Comcast directly, instead of using middlemen, to insure that Netflix customers received a quality streaming experience.
That agreement was viewed by many as a bullying win by Comcast after many reports circulated that Comcast was choking down on Netflix’s streams in the latter part of last year.
Comcast did not take those comments lying down. Instead it issued a decidedly pointed blog post hammering Netflix essentially accusing Netflix of lying to cover its own interests.
Today Netflix took another shot with an intense statement in a blog post called The Case Against IPS Tolls, that essentially says Comcast is trying to charge both content providers and customers for the privilege of reaching each other. Or double dipping. (Where have we heard that before?)
In sum, Comcast is not charging Netflix for transit service. It is charging Netflix for access to its subscribers. Comcast also charges its subscribers for access to Internet content providers like Netflix. In this way, Comcast is double dipping by getting both its subscribers and Internet content providers to pay for access to each other.
It is true that there is competition among the transit providers and CDNs that transport and localize data across networks. But even the most competitive transit market cannot ensure sufficient access to the Comcast network. That’s because, to reach consumers, CDNs and transit providers must ultimately hand the traffic over to a terminating ISP like Comcast, which faces no competition. Put simply, there is one and only one way to reach Comcast’s subscribers at the last mile: Comcast.
Netflix, in a most damning fashion also bluntly says that Comcast was slowing down its streams.
Netflix agreed to pay Comcast for direct interconnection to reverse an unacceptable decline in our members’ video experience on the Comcast network. These members were experiencing poor streaming quality because Comcast allowed its links to Internet transit providers like Level3, XO, Cogent and Tata to clog up, slowing delivery of movies and TV shows to Netflix users.
Comcast wasn’t going to let that kind of talk just sit on the coffee table like an unused remote and fired back rather quickly with a statement of its own.
Netflix’s argument is a House of Cards. But there is no need for us to engage in a point-counterpoint with Netflix to demonstrate the continued distortions and inaccuracies on which it relies. As we and other industry observers have already noted, Netflix’s decision to reroute its Internet traffic was all about improving Netflix’s business model. While it’s understandable for Netflix to try to make all Internet users pay for its costs of doing business (as opposed to just their customers), the company should at least be honest about its cost-shifting strategy.
The House of Cards reference is certainly an entertaining one, but I’m not sure the semiotics hold. Regardless, Comcast basically goes on to say that Netflix made poor business decisions and slowed down its own traffic.
As at least one independent commentator has pointed out, it was not Comcast that was creating viewability issues for Netflix customers, it was Netflix’s commercial transit decisions that created these issues.
That independent commentator Comcast refers to is Dan Rayburn of the Streaming Media Blog who took Netflix to task earlier by saying “In reality, the blame could fall on Netflix for continuing to send traffic over a link they know is congested, when alternatives exist in the market.”
By citing that reference, Comcast is boldly calling Netflix out, and calling its bluff in a high stakes game where the stakes keep getting higher. Both companies have now fired very public shots directly at each other instead of across each other’s bow. It will be tough to walk these comments back.
And to add more fuel to the fire, and perhaps shed some light on Netflix’s original broadside, an announcement was made today that Netflix is going to launch on three other U.S. cable operators via an App on Tivo boxes. Those cable companies are RCN Communications, Atlantic Broadband and Grande Communications. Each are small operators compared to Comcast, whether or not it gets permission to acquire Time Warner Cable.
Again, remember that this was supposedly a new warm partnership just a few months ago. At the moment it looks like winter is surely coming.
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