Let's do some simple math to prove your point.
Assume Comcast has about 10 Tbps of traffic at peak, single-counting all traffic that transits AS 7922 (Comcast's national backbone network). [1] Now assume that a full 50% of that traffic is originated by Netflix, and the market price for transit is $2/mbps. The percentage is likely quite lower than that, and given 5 Tbps of traffic volume and coordination between the two networks to reduce the number of miles the bits need to be hauled by both networks, the per-megabit price is almost certainly quite a bit less.
But even with these obviously flawed guesses, we're only talking about $120mm/year in costs. Netflix's worldwide revenue in 2013 was $4.3b [2]; Comcast's 2013 revenue from their US HSI business alone was $10.3b. [3] If 50% of Comcast's $10.3b business was in jeopardy, don't you think they'd find a way to absorb that $120mm?
[1] http://as7922.peeringdb.com/
[2] Netflix Q4 2013 earnings release, http://ir.netflix.com/results.cfm
[3] Comcast 10-K filed 2/12/2014
(edited: formatting)
Netflix could have held out, and made Comcast out to be the bad guy, or could have leaned on Cogent to get the circuits installed - but, in this case, they folded and just decided to pay Comcast. This will probably set a very bad precedent for them when it comes to renew those agreements in 5-10 years, or however long they will be. Maybe they are hoping for some competition to enter the US environment by then.
How would that work? Comcast customers by and large can't switch to another broadband provider and Netflix customers can certainly switch to another video provider (Comcast!). It's not like this is a brand new issue, Netflix has held out for a long time. The Comcast / TWC merger is what finally did it, 30M combined customers is too big to risk on a public game of net neutrality chicken.
Surely they're still working on lobbying efforts to make it illegal for a company like Comcast to simultaneously have a monopoly on selling broadband and compete with services using said broadband. It's pretty obvious at this point that internet access is a utility and it should be treated as such.
The Hacker News readership includes many people capable of starting ISPs. Comcast's large profits, which have been used to fund a string of high cost acquisitions, are a juicy target for potential competitors. Yet you never see discussion of ISP startups on Hacker News because the barriers to entry protect the current carriers. This wasn't the case in the 90s, and had Hacker News existed back then ISP startups would have appeared frequently.
The issue of telecoms not having competition has been the case for years. Back in the BBS days Jack Rickard used to harp on this in Boardwatch [1] magazine. I recall him saying something like, "Two guys with a screwdriver should be able to start a phone company."
Indeed. The late 90s / early 2000s were the golden age of the CLEC. There were certainly pain points (like getting copper pairs provisioned), but I remember not caring that my building didn't support Comcast Internet because I had an SDSL connection from Telocity and an ADSL connection from Speakeasy.
That said, most were either bought out, or went under within a couple years. It was a rough time for commercial SysOps in the mid-90's... not that I really feel bad for them. Times and environments change... The BBS and art scenes are still around today, but not nearly what they were in the early-mid 90's...
I miss it a lot... since most BBSes were based in a local area, there were a lot of get togethers, and you'd meet and talk to people you wouldn't necessarily do in today's internet, which is based in interest groups.
The cable industry has evolved into a bunch of regional monopolies that do not compete with one another.
The effect of breaking Comcast up AT&T-style would be... a bunch of regional monopolies that do not compete with one another. And then, as with AT&T, proceed to consolidate via M&A into larger regional monopolies... that do not compete with one another. Same as now.
Welcome to the American telecommunications industry.
""" But there's a silver lining for people who hate this deal: By the government's own standards, the Comcast—Time Warner deal should be blocked. To understand why, you have to know that there's a thing in antitrust law called the Herfindahl-Hirschman Index, or HHI. In very basic terms, the HHI is a way to measure the concentration of a given market. And the HHI is the test the government's lawyers apply if they want to see whether a proposed merger would create monopoly-like conditions. """
That's totally backwards. Comcast's customers are paying for access to Cogent's customers, including Netflix.
It's not Comcasts responsibility if Cogent did not have peering arrangement or had paid for sufficient capacity to handle their end of the connection, that their customer was paying them to provide.
If it was, I'd love to provide Netflix connection much cheaper than Cogent. I'll provide it over my 10Mbps uplink, and blame consumers ISPs when everything falls over.
Since you've paid Comcast, they're now required to go to my brother's ISP and arrange more peering, right? Also, since you're paying, I shouldn't have to pay my brother, and he shouldn't have to pay anyone else, right?
Come to think of it, why isn't all hosting bandwidth free? Why do Azure and AWS charge for outbound bandwidth, but not inbound?
Netflix pays level3 for transit service (you pay your brother). Comcast pays level3 (your brother) for transit service. Notice how level3 is neither the source nor the destination of the traffic.
Netflix's traffic increases from, for example, 500Gbps to 1Tbps. Comcast's level3 ports fill up because netflix increased in popularity.
In general networks that pass a lot of traffic like this end up peering directly and avoiding transit costs.
Comcast has two choices. They can either pay level3 for another 500Gbps or they can transition the full 1Tbps to free peering directly with netflix. And yes, I consider it Comcast's responsibility to do one of those two things with their subscriber revenue, which, incidentally, most other ISPs in the US are doing.
Instead they are choosing option 3 which is, leverage their local access monopoly to force netflix to pay them, and protect their cable and xfinity services.
If it is really expensive to accept Netflix's offer of free hardware and free bandwidth then the additional cost should be passed to the customer. The problem is that it's not actually more expensive and Comcast knows their customers can't choose someone else so it's a much better strategy to squeeze the content providers.