Netflix/Comcast deal makes net neutrality battle real

Net neutrality is no longer a theoretical issue - it's time to start worrying.

I'm not currently a customer of either Netflix or Comcast, but the interconnection deal between the two companies has got me worried big time. Whether or not you use either of these services, you should be worried too. And if you're just some run-of-the-mill network executive trying to make sure your customers can reach your website or your remote employees can access their corporate apps, well then you should be really, really worried.

Forget what the companies are saying, such as "Netflix receives no preferential network treatment under the multi-year agreement." Pay attention to the part of the deal, where it says "terms of which are not being disclosed."

A simple story sets a scary precedent

The story here is simple: Comcast was throttling Netflix traffic on its network, and the only way for the movie service to get them to stop was to pay them. Oh, and the Wall Street Journal says this deal comes on top of similar arrangements with Cox Communications and other smaller U.S. carriers - as well as international carriers. Reuters, meanwhile, is reporting that Netflix will most likely have to pay off AT&T and Verizon, too.

If that doesn't set a terrifying precedent for any company that depends on the Internet, I don't know what will. Unless, of course, you happen to be a giant multinational corporation flush with boatloads of cash you're itching to spend to make sure your traffic gets through. In that case, well, no problem, and maybe even some side benefits when your penny-pinching competitors can't afford to match your largesse and find themselves stuck on the last train to Slowville.

After all, despite having to pay extra to keep reaching its own customers, Netflix stock hit new records on Monday. That's because Netflix can afford to pay, while new entrants into the market might not be able to, which raises barriers to entry and helps Netflix protect its market share. Good for Netflix, not so good for startups and innovation.

Amazingly, Verizon CEO Lowell McAdam told CNBC that the "Netflix deal shows that a 'dynamic market' can self-regulate." I almost choked on my linguini when I read that.

Not the same as "sponsored data plans"

Yes, I know that back in January I said that AT&T's sponsored data plan wasn't the end of the world. But that was different - it was just relieving customers of the need to spend some of their data cap on that particular content. As long as your cap wasn't cut, I thought, what's the harm?

This is different. Very, very different. Until Comcast got paid, one specific company's traffic was facing a significant speed bump. What if that company was one you did business with? Would you stick with them or switch to a faster alternative? Worse, what if that was your company? What would you do then?

As of this week, these are no longer theoretical questions.

In the wake of a recent court decision that struck down the FCC's net neutrality regulations, the Commission is working on new rules designed to "meet the court's test for preventing improper blocking of and discrimination among Internet traffic, ensuring genuine transparency in how Internet service providers manage traffic, and enhancing competition."

Let's hope they come up with something that works, because I'm honestly worried that the Internet really will become a pay-to-play space where only those who can pony up the bucks will be able to count on first-class performance.

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