Netflix Agrees to Pay Verizon for Direct Connections

Netflix has — reluctantly — inked a deal with Verizon Communications, under which the streaming-video service will pay the telco for high-speed interconnections.

Deal comes after Netflix reached a similar agreement with Comcast in February. They’re the only two Internet service providers Netflix is paying for direct access to consumer broadband subscribers.

“We have reached an interconnect arrangement with Verizon that we hope will improve performance for our joint customers over the coming months,” Netflix said in a statement.

SEE ALSO: Netflix Chief Hastings: Comcast and Other Internet Providers Should Give Us Free Access

Netflix is paying for guaranteed access to bandwidth to Comcast and Verizon, but the company doesn’t believe it should have to. CEO and founder Reed Hastings has complained that big ISPs are simply extracting a “toll” from Netflix because they have leverage in the market. Consumers already pay their ISP for Internet access, Netflix argues, and the providers shouldn’t be allowed to double-dip.

“While in the short term Netflix will in cases reluctantly pay large ISPs to ensure a high-quality member experience, we will continue to fight for the Internet the world needs and deserves,” Hastings wrote in a blog post last month.

Verizon confirmed the deal. “We have reached a deal with Netflix, but we are not providing details of the agreement,” Verizon spokesman Alberto Canal said. “I can tell you that we reached this agreement to deliver improved service for our combined customers.”

Netflix has called for a form of “strong” net neutrality, so that it won’t be forced to pay ISPs directly to deliver video streams in the way it has agreed to pay Comcast and Verizon.

The Federal Communications Commission, meanwhile, is introducing new net neutrality rules — under which it will permit Internet service providers to charge content companies for dedicated bandwidth. FCC chairman Tom Wheeler last week defended the proposed rules, saying the so-called “fast lane” provision was misconstrued. Under the commission’s new net neutrality, replacing the previous rules that an appeals court struck down this year, ISPs would be barred from blocking websites but would adopt a new standard for Internet service providers engaging in “commercially reasonable” conduct in the way they treat traffic.

On another political front, Netflix last week said it opposed Comcast’s $45 billion takeover bid for Time Warner Cable, saying the resulting entity would give it unprecedented control over broadband. “Comcast is already dominant enough to be able to capture unprecedented fees from transit providers and services such as Netflix,” Netflix CEO Reed Hastings and CFO David Wells wrote in their Q1 2014 letter to shareholders. “The combined company would possess even more anticompetitive leverage to charge arbitrary interconnection tolls for access to their customers. For this reason, Netflix opposes this merger.”

Comcast countered that Netflix was opposing the deal in an effort to “shift costs that it has always borne to all users of the Internet and not just to Netflix customers,” a rep for the cable giant said.

Netflix runs a program called Open Connect for ISPs, a content-delivery system in which caching servers are located in service provider networks to more efficiently deliver video to subscribers (and reduce Netflix’s transit costs). Comcast and Verizon don’t participate in Open Connect, and both have said that Netflix and others who send significantly more traffic than they receive have options for how to pay the freight to get their content delivered.

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