Coase, Net Neutrality and Netflix
[Commentary] Comcast and Netflix have come to a deal on ‘peering.’ Basically, what this means is that Netflix will pay Comcast to ensure that Netflix’s customers get good Internet service for Netflix. While apparently Netflix is not getting special treatment under the deal, as we economists all know, it is what not having a deal would have done that has driven this.
So while the deal itself may be ‘neutral,’ the counterfactual (without the deal) may well not have. Of course, that counterfactual could also have involved Netflix complaining with regard to the proposed Comcast-Time Warner merger and so ‘who is paying who’ is perhaps a little less clear here. (Note also that my statements here are no different given that Netflix may just be substituting Comcast for another provider in accessing Comcast customers; the issue is not so much that but whether there is something ‘special’ in the Comcast-Netflix arrangement that may not have happened without the arrangement).