Over the weekend, Comcast and Netflix entered into an agreement that will see Netflix getting priority bandwidth allocation when streamed across Comcast's network. While many of us see this as a violation of the now defunct net neutrality laws, Verizon seems to disagree. Today Verizon's CEO announced that Netflix has also agreed to pay his company for the same type of prioritization over its network.
Verizon's CEO, Lowell McAdams, said that the two companies have been in talks for more than a year, and he fully expects that the two companies will come to terms quite soon. "If you see someone come in with a lot of load on the internet, with video, you've got to get that in an efficient place. So making the connection far out on the network is a good thing, and frankly, paying for it," said McAdams. "To me this shows you don't necessarily need a lot of regulation in a dynamic market here. By doing these commercial deals we'll get good investments and good returns for both parties."
Unfortunately, what this actually means for consumers is that Netflix will have to find a way to make up for the lost revenue that it is having to spend paying off the ISP's to ensure its content gets delivered in as high quality as possible. This means that Netflix will eventually have to raise subscription prices, or cut back on the number of movie and TV show licenses it purchases. This opens the door for the ISPs to do this sort of thing with other services such as Hulu, HBO GO, Amazon Prime, and Google Play.
What's to say that the ISPs will not begin charging Facebook, Twitter, or YouTube for better bandwidth? I see both these deals as nothing more than the same type of strong arm bullying that small businesses saw from NYC mobsters in the 20th century. Comcast and Verizon are effectively walking into a little mom and pop bakery, smashing the display case's glass, and saying "Pay up or we will come in and do the same thing next week." In any other form, this would be considered extortion, but since it deals with the Internet, the FCC seems to think its OK. Unfortunately, this appears to be the new normal, and things can only go down from here.