Netflix packets being dropped every day because Verizon wants more money
Verizon wants to be paid by consumers and Cogent, but Cogent refuses to pay. — The battle over who should pay to carry Netflix traffic is heating up again, and one of the main players blames Verizon's greed …
Context & Ripple Effects
This story landed with unusual breadth — Gigaom, CNNMoney, PC Magazine, Gizmodo and others picked it up the same day — because it crystallizes the question the Comcast-Netflix arrangement had already put on the table: who pays when a content provider's traffic overwhelms a last-mile network. Gigaom's same-day report that a direct Comcast-Netflix connection suggested a peering agreement had been reached shows Netflix was already being pushed toward paying access networks directly rather than routing through transit.
At stake here is the settlement-free peering norm. Verizon is demanding fees from Cogent to carry Netflix-bound traffic while also charging consumers for the connection, and Cogent — which refuses to pay — has left its Verizon links congested enough that Netflix packets are reportedly being dropped daily.
First-order effects
- Netflix subscribers on Verizon connections experience degraded streaming during peak hours right now, because packets traversing the congested Cogent-Verizon links are being dropped daily.
- Cogent faces a business-model squeeze: pay Verizon's demanded fees and erode the economics of transit, or hold the line and absorb blame for its customers' congestion.
Second-order effects
- Netflix has a demonstrated exit from exactly this squeeze — the direct Comcast connection reported the same day points to paid peering deals with access networks, which would route money around transit providers like Cogent entirely.
- Other backbone operators carrying heavy video loads will face the same Verizon-style fee demands, forcing them to choose between margin erosion and the congestion blame Cogent now carries.
Third-order effects
- If paid interconnection becomes the standard for high-volume content, the settlement-free peering model that built the internet's edge gives way to a two-sided billing structure — consumers pay ISPs for access while content companies pay again for delivery, which puts the practice squarely in net neutrality regulators' sights.
- Transit providers risk structural marginalization as large content platforms contract directly with last-mile networks, concentrating bargaining power among a handful of giant access ISPs.
The trend: Video-driven traffic growth is pushing interconnection from free settlement-based peering toward negotiated paid deals, letting access ISPs charge for delivery twice and setting up a fight over whether regulators should treat those payments as neutral.