Netflix CEO Reed Hastings has agreed to pay to gain unfettered access to cable giant Comcast’s Internet freeway, sources said.
The multiyear pay-to-play deal comes on the heels of a Netflix report showing the speed of its stream over Comcast systems had slowed 27 percent in recent months. Terms weren’t released.
It isn’t known if Netflix will be forced to raise its popular $7.99 a month streaming fee to offset any added cost.
The cable giant, which recently announced a $45 billion merger with Time Warner Cable, had long sought such a deal with Netflix, a heavy user of bandwidth, according to a source. Heretofore, Netflix had balked, proposing that it place its own servers inside Comcast buildings.
Other similar agreements are expected with AT&T and Verizon, as the Los Gatos, Calif.-based company seeks to keep its red-hot “House of Cards,” and other offerings, streaming smoothly.
Comcast and Netflix agreed to “provide Comcast’s US broadband customers with a high-quality Netflix video experience for years to come.”
“This should be a wake-up call to regulators,” said Derek Turner, research director with Free Press, a policy and research group, who predicts the pay-to-play arrangements will be “very bad news” for cash-strapped Internet startups.
One source described the cost to Netflix as “standard.” “It’s about paying for support for the plumbing,” this person said.
Still, fears about rising costs have been growing since a federal Washington, DC, appeals court ruled that regulators have no right to dictate how much ISPs charge content providers.