Feb. 24 - Netflix's landmark deal with Comcast to speed up delivery of its videos could push Verizon & AT&T to also start charging the video streaming company. Fred Katayama reports.
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No more slow, jittery Netflix video for Comcast subscribers. Netflix caved, agreeing to pay one of the largest broadband providers to speed up delivery of its content after months of trying to get Comcast to do so for free. The watershed deal could pave the way for other broadband providers like Verizon and AT&T to start charging Netflix.
It also calls into question whether this deal violates net neutrality, under which content providers are supposed to get equal treatment for distribution to consumers. Netflix says it won't get preferential treatment under the agreement.
The deal could increase operating costs for Netflix, but J.P. Morgan analyst Doug Anmuth remains bullish on the stock. He says, "A more direct connection should be positive for Netflix user experience ... and we believe Netflix likely anticipated some degree of higher costs related to network agreements in its 2014 guidance."
Investors weren't worried. Netflix stock rose at the start of trade, adding on to its 17 percent gain this year. Comcast stock higher as well as that of Verizon.
Even though Netflix eats up a third of Internet traffic at peak hours in North America, investment bank FBR says broadband companies can't seek sky-high payment because one of the key reasons many viewers subscribe to their profitable broadband services is Netflix.