Netflix pays Verizon for network connection to speed up video

Netflix today confirmed that it reached an interconnection agreement with Verizon, similar to the one it recently struck with Comcast.

“We have reached an interconnect arrangement with Verizon that we hope will improve performance for our joint customers over the coming months,” Netflix spokesperson Joris Evers told Ars. “It is a paid interconnect agreement."Word of the deal first leaked on Twitter when analyst Walter Piecyk wrote, “Verizon CEO [Lowell McAdam] confirms they have signed direct connection deal with Netflix like Comcast’s.”

When contacted by Ars, Piecyk said that “McAdam confirmed a deal with Netflix in answer to our question at a group investor meeting [today]. No further details were provided on the financial terms.”

Verizon spokesperson Alberto Canal confirmed to Ars that the company has reached a deal with Netflix, but he did not provide further details. “We reached this agreement to deliver improved service for our combined customers,” Canal said.

The Netflix/Verizon deal is similar to the one in which Netflix paid for a direct connection to Comcast’s network. These “paid peering” deals don’t provide Netflix preferential treatment from the ISP’s network to consumers’ homes, but they do let Netflix bypass congestion at the interconnection points between ISPs and transit providers like Cogent and Level 3.

Netflix performance has suffered on numerous ISP networks because of disputes over money. AT&T is another big provider that’s still demanding payment, as Netflix subscribers on AT&T’s network continue to receive poor performance. Evers said there is no update on negotiations with AT&T or other providers today.

Netflix has grudgingly agreed to pay Comcast and Verizon despite arguing that the Federal Communications Commission should ban such payments.

The FCC has declined to regulate the peering market, so Netflix will probably have to keep opening its wallet. Additionally, the FCC decided to craft new rules that let ISPs charge companies like Netflix or Skype for preferential treatment over the network’s last mile. If those rules pass, ISPs will be able to get paid by content providers both for direct connections at the edge of the network and for a faster path to consumers over the last mile.

Netflix performance on Comcast improved 65 percent after the companies struck their peering arrangement.

For background on how peering and interconnection disputes can harm online video performance, check out our feature from last year: “Why YouTube buffers: The secret deals that make—and break—online video.”