Netflix and Opponents: Deciphering Paid Peering and Dueling Diagrams

[Commentary] Netflix and Entropy Economics have issued dueling network diagrams aimed at supporting opposing points of view on paid peering -- an issue that has been hotly debated since Netflix signed a paid peering deal with Comcast earlier this year.

Yet the diagrams have a striking similarity when it comes to showing how Netflix connects to Comcast. It’s possible that by keeping up the pressure about traffic exchange, Netflix is hoping to pressure regulators into imposing some sort of obligations on Comcast and Time Warner Cable as a condition of approval of Comcast’s acquisition of Time Warner Cable.

Now that Charter is involved in that deal as well, it may not be exempt either. And conditions written into merger approvals sometimes have a way of gaining traction beyond the merged companies.

Regulators should tread carefully before imposing any major new traffic exchange requirements. Considering the complexity of the issue and how quickly practices change, it’s difficult even to determine what those requirements might be. The true cost of interconnection is dependent on a wide range of factors. And only the network operators know and understand the dollar values underlying these factors.