Netflix/ Comcast Deal Relies on Third-Party Data Centers for Interconnection

Comcast and Netflix confirmed that they have reached an interconnection agreement -- and although the companies did not provide details, sources familiar with the matter told the Wall Street Journal that the agreement calls for Netflix to pay Comcast for traffic sent to Comcast customers. A source familiar with the matter told Telecompetitor that the new agreement calls for Netflix and Comcast to interconnect at about a dozen third-party data centers and that Netflix would put storage servers in those data centers.

Netflix originally hoped to get broadband providers to agree to exchange traffic for free by putting specialized storage servers in or near broadband provider points of presence (POPs) to store popular content, thereby minimizing the amount of traffic that would have to traverse long distances to reach end users. But major broadband providers didn’t see that as a solution to the traffic imbalance issue and did not want to set a precedent of allowing content providers to put servers in their POPs. Additionally some providers, including Verizon, are accustomed to getting paid for providing content storage capability to website operators.