After Comcast, Netflix signs traffic deal with Verizon
Netflix just confirmed that it will pay Verizon for direct access through the carrier's network, allowing for improved streaming video for customers. According to a statement, “We have reached an interconnect arrangement with Verizon …
Context & Ripple Effects
This is the second domino to fall in a three-month sequence: after Verizon's January court victory against the FCC's open-internet rules removed the legal shield around interconnection, Ars Technica documented Netflix traffic being degraded on Verizon's network while the carrier sought payment. Netflix then signed with Comcast in February, and within weeks reported a 65 percent jump in streaming speeds on Comcast, giving it proof the paid model works.
The Verizon arrangement, confirmed April 28 and picked up by eight major outlets including the Washington Post, Gigaom and CNET, converts what looked like a one-off concession into a repeatable template — arriving just as Comcast's $45.2 billion Time Warner Cable bid keeps consolidation pressure on the ISP side.
First-order effects
- Netflix customers on Verizon should see improved stream quality immediately, ending the packet degradation Ars Technica reported in February; Netflix becomes a paying transit customer of both of the country's largest broadband providers.
- Verizon gains a new revenue line from the exact congestion point where it was throttling traffic, at zero network cost beyond the port itself.
Second-order effects
- Every remaining major US ISP without a Netflix deal is now negotiating from strength — Netflix has demonstrated twice that it will pay rather than let streams degrade, so carriers can hold out for terms.
- Smaller content distributors without Netflix's scale face a widening cost gap: if the biggest streamer buys priority, rivals must either match the payments or ship visibly worse video on the same pipes.
Third-order effects
- With open-internet rules struck down in court and paid peering normalized by the market leader itself, the effective regulatory question shifts from blocking to interconnection pricing — an area the FCC's old rules never covered.
- If the pattern holds, interconnect fees become a standing cost of reaching US consumers, favoring large content companies and pushing smaller ones toward consolidation or alternative delivery — Netflix's own peer-to-peer research points at exactly that hedge.
The trend: Following the January court loss for net-neutrality rules, US broadband carriers are converting interconnection into a paid product, and content companies' willingness to pay is becoming the price of admission for quality delivery.