What the Comcast-Netflix deal means to network neutrality

Four months ago, Netflix CEO Reed Hastings told financial analysts he believed technological innovation would continue only if Internet service companies were not "taxing each other." Now his company agreed to pay an undisclosed sum to Comcast to ensure that its streaming of online movies and TV shows runs smoothly. It's a stunning about-face, according to critics, who fear the deal imperils the concept of network neutrality and could cost customers more money in the long run.

Two factors caused the sudden switch, which BTIG Research analyst Richard Greenfield calls "a complete 180-degree change" for Netflix: the overthrow of network neutrality rules and the proposed merger between Comcast and Time Warner Cable. The deal also could mean Comcast has eliminated one influential dissenter that could help block the proposed merger with Time Warner Cable, said analyst Ken Doctor of the media, information and entertainment consulting firm Outsell. "They'll be on the sidelines now," Doctor said. "It makes less sense today for Netflix to oppose or raise questions about Comcast acquiring Time Warner Cable than it did last Friday." The agreement also sets a troubling precedent for other companies that depend on the Internet for revenue, including entertainment companies and Web publishers who are not as big or lucrative as Netflix, he said. "It raises a lot of questions about who exactly has access to the Internet and at what price," he said.