Death of Net Neutrality in Netflix-Comcast Deal Is Exaggerated

NEW YORK (TheStreet) -- Comcast's (CMCSA) agreement to change its broadband carriage arrangement with Netflix (NFLX) was billed as the "death of network neutrality" by the folks at Public Knowledge, a Washington nonprofit group interested in choice on the Internet.

It isn't. It could become that, but it isn't that yet.

Netflix is paying Comcast for direct access to the carrier's network, but that's not a precedent that will control Comcast's relationships with other service providers, because Netflix' situation is unique and required a change in what Internet service providers call a "peering agreement."

When two networks peer, they assume that just as much traffic is going in one direction as the other. But that's not the case with Netflix. Almost all of its traffic is one way.

During peak hours, Netflix can represent 30% of Internet traffic hitting Comcast. Netflix has tried many ways to deal with that -- connecting to Comcast's network through third-party middlemen such as Cogent Communications (CCOI) and building a network of local connections through its Open Connect project. But the load on the last mile into a user's home is still extreme.

Netflix will pay Comcast's additional costs to handle Netflix's load, acknowledging that the previous peering arrangement was one-sided.

It's a cost to Netflix, but the company was also paying Cogent, and Open Connect had its costs. Some of the Netflix traffic will now be routed through exchanges run by Equinix (EQIX), which runs network interchanges, and Netflix will foot the bill. Stock in Equinix was about flat in early trading Monday.

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