Toll spat continues as Netflix accuses Comcast of double dipping

The smoldering spat between Netflix (NASDAQ: NFLX) and Comcast (NASDAQ: CMCSA)--which quickly escalated out of control when Netflix openly opposed Comcast's $45.2 billion acquisition bid for Time Warner Cable (NYSE: TWC)--has turned into a full-fledged forest fire with a Netflix blog post that denigrates Comcast's treatment of its content and reiterates opposition to the merger. Comcast responded by accusing Netflix of "distortions and inaccuracies."

Ken Florance, vice president of content delivery at Netflix fanned the flames between the two companies when he blogged that Comcast double dips by charging Netflix to access its customers and then charging those customers for access to Internet content. Jennifer Khoury, Comcast's senior vice president of corporate and digital communications, tossed gasoline on it with a blog post that accused Netflix of "continued distortions and inaccuracies."

Comcast, Florance said, "is double dipping by getting both its subscribers and Internet content providers to pay for access to each other."

He also suggested Comcast created a situation where Netflix was forced to pay for access and added a chart "which shows how Netflix performance deteriorated on the Comcast network and then immediately recovered after Netflix started paying Comcast (for direct interconnection) in February."

This service payment, Florance contended, is different than what Netflix pays transit networks like Level 3, XO, Cogent and Tata. Those services "carry traffic over long distances and provide access to every network on the global Internet. When Netflix connects directly to the Comcast network, Comcast is not providing either of the services typically provided by transit networks."

Actually, Comcast has a "multiplicity of other agreements just like the one Netflix approached us to negotiate," Jennifer Khoury, blogged in response. "Those agreements have not harmed consumers or increased costs for content providers--if anything, they have decreased the costs those providers would have paid to others."

Khoury also disputed that Comcast was responsible for any degradation of Netflix signals.

"As at least one independent commentator (Dan Rayburn: EVP StreamingMedia.com, Principal Analyst, Frost & Sullivan) 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."

The question comes back to net neutrality or, as Khoury called it, the "Open Internet."

"No ISP in the country has been a stronger supporter of the Open Internet than Comcast--and we remain committed both to providing our customers with a free and open Internet and to supporting appropriate FCC rules to ensure that consumers' access to the Internet is protected in a legally enforceable way," she wrote.

That stance opened up another can of worms as the FCC is under fire for reportedly considering adding a toll lane to Internet traffic in its revised net neutrality proposal, in which companies that want special privileges can pay ISPs for the right to more bandwidth over their owned networks.

Netflix speed quality on Comcast

Graph: Netflix streaming quality over Comcast's network, before and after their interconnect agreement. (Source: Netflix)

For more:
- see Netflix's blog post
- and Comcast's response

Related articles:
Netflix opposes Comcast-TWC merger, raises subscription by up to $2 in some markets
Franken asks Netflix's Hastings to share views on Comcast-TWC acquisition
Netflix, Arris stocks rocked by Comcast-Apple rumors
Net neutrality wars: AT&T exec calls Netflix's Hastings 'arrogant'
Reported net neutrality changes roil consumer advocates, send Wheeler into defensive mode

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