Comcast, Netflix Make Peace

The cable giant Comcast and the OTT challenger Netflix didn’t see eye to eye very often in the first half of this decade.  But today the news is of a very different sort.  As Comcast rolls out its new X1 set-top box, Netflix’s video content will be among the choices the cable operator offers to consumers.

Of course, Comcast customers can already get Netflix over their connections.  The news today means that Comcast is lowering the barrier and making it easier and more natural to do, which indicates that the relationship between the last mile and content is moving beyond the disputes of the past.

A few years ago, when Netflix sought direct connections with Comcast and Comcast made them pay, Netflix took its complaints to the FCC in a very vocal way.  Those complaints helped shape today’s more stringent network neutrality regime, under which the FCC is keeping a closer eye on the interconnection space.

That regime, which is based on the extension of Title II to internet traffic, is doing far better in the courts than its predecessor. Meanwhile, the us-versus-them approach to the last mile/content interface has been getting less rigid.  We have big content dabbling in fiber infrastructure both directly and indirectly, whether it’s Google Fiber’s ongoing buildouts or Microsoft and Facebook funding transatlantic cable systems.  And we have network operators steadily acquiring more content capabilities, with the ongoing Yahoo auction being a prime example.

It’s not all fun and games though.  The FCC has been pressing cable operators to open up their set-top-boxes to competition.  Bringing in Netflix to its boxes can be seen in part as an attempt to forestall that possibility.

Meanwhile, Netflix has been seeing its US growth slow as the more receptive customers have already been won.   Winning the next wave of converts will require the process to be easier.  Whatever the financial terms Comcast is offering for today’s move are, they should be seen in the light of Netflix’s cost of customer acquisition going forward.

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Categories: Cable · Internet Backbones · Video