The battle for TV, part two: paying for bandwidth
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The battle for TV, part two: paying for bandwidth

Many folks think that Apple should and will buy Netflix. I personally doubt it, but I can see the advantages for both companies. Regardless, pricing for Netflix and similar services may see a price hike.

On Nov, 19, Comcast informed Level 3, an Internet backbone provider that handles streaming for Netflix, that, for the first time, it will demand a recurring fee from Level 3 to transmit Internet online movies and other content to Comcast's customers who request such content.

"By taking this action, Comcast is effectively putting up a toll booth at the borders of its broadband Internet access network, enabling it to unilaterally decide how much to charge for content which competes with its own cable TV and Xfinity delivered content," says "Fortune (). "This action by Comcast threatens the open Internet and is a clear abuse of the dominant control that Comcast exerts in broadband access markets as the nation's largest cable provider. This sets a scary precedent.  If Comcast can charge an extra fee to Level 3 for hosting Netflix content, it could (and probably will at some point) charge Google to stream YouTube movies or Apple to broadcast iTunes content.  Because Comcast owns the last mile, they hold the keys."

In its defense, Comcast says it had to do something because of all the bandwidth Netflix is hogging. "Level 3 has misportrayed the commercial negotiations between it and Comcast," Joe Waz, Comcast's senior vice president for external affairs, said in a statement. "This has nothing to do with Level 3's desire to distribute different types of network traffic. Comcast has long established and mutually acceptable commercial arrangements with Level 3's content delivery network competitors in delivering the same types of traffic to our customers."

Prior to the Netflix deal, Comcast and Level 3 had a typical industry peering arrangement, notes "CNET" (http://news.cnet.com/8301-1023_3-20024070-93.html). Level 3 is regularly carries traffic that originates and terminates on Comcast's broadband network. Under their previous arrangement, the companies essentially swapped traffic since both networks generated equal amounts of traffic.

However, with the Netflix deal, the balance of traffic between the two companies will shift dramatically, says "CNET." Netflix has been said to generate 17 percent of traffic on the Internet at peak times in the U.S. Comcast said in its statement that it expects to receive five times more traffic from Level 3 as part of this new arrangement.

Netflix's bandwith consumption is likely to increase still more. The company recently landed another major content deal with Disney and ABC. In exchange for a minimum 15-day delay between a first TV appearance and the online version, Netflix will get a deeper catalog that includes prior-season access to current shows like "Grey's Anatomy" and full seasons of past shows like "Lost" and "Scrubs." Disney's TV content is expanding, and ABC Family is reaching the Internet for the first time.

And companies like Netflix, Hulu and something-I-think-Apple-may-offer will only continue to grow as cable and satellite subscriptions decrease. It's a natural progression. With the exception of sports and local TV shows, you can get most of the same shows and movies you want from Internet TV for a fraction of the price of cable or satellite.

The long-term future of television viewing is the Internet. And that probably means higher pricing for Internet access. However, I'd pay more (at least some more) if I could drop cable TV entirely.

-- Dennis Sellers

 

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