Netflix reaches streaming traffic agreement with Comcast

Netflix and Comcast have reached an agreement aimed at smoothing the streaming of Netflix content to the cable company's customers, ending a dispute that included suggestions of throttled traffic.

The video-rental company has agreed to pay Comcast for direct access to its broadband network, sources told The Wall Street Journal, which was first to report the deal. The agreement comes less than two weeks after Comcast announced a $45 billion deal for Time Warner Cable, a merger that if approved could create a cable empire serving 33 million customers across the country.

The agreement was revealed in a joint announcement from the companies that did not disclose the terms of the deal.

Comcast and Netflix today announced a mutually beneficial interconnection agreement that will provide Comcast's U.S. broadband customers with a high-quality Netflix video experience for years to come. Working collaboratively over many months, the companies have established a more direct connection between Netflix and Comcast, similar to other networks, that's already delivering an even better user experience to consumers, while also allowing for future growth in Netflix traffic. Netflix receives no preferential network treatment under the multi-year agreement, terms of which are not being disclosed.

Under the so-called "paid peering" deal, Netflix will be allowed to connect directly to Comcast's network instead of going through intermediaries, as it formerly did.

The companies have for years been locked in a dispute over the cost of delivering Netflix streams to its customers over Comcast's broadband network. While Netflix wanted to connect to Comcast's network for free, the cable giant sought compensation for the heavy traffic that Netflix users generate, arguing that it costs the company a lot to deliver Internet video.

In recent months, the dispute appeared to be heating up, with suggestions that Comcast customers were seeing their connections to Netflix degraded. Netflix released data last month that showed the average Netflix streaming speed decline 27 percent since October.

The deal is likely to presage similar agreements with other broadband carriers such as AT&T, Verizon, and Time Warner Cable, which have also refused Netflix's request to connect to their servers without compensation.

Although the two companies say Netflix is not receiving preferential treatment, observers worry that the deal may deal a setback to Net neutrality, which aims to prevent broadband providers from blocking access or discriminating against Internet traffic traveling over their connections.

"It is clear that residential ISPs should be in the business of charging their users for access the Internet, not of charging the rest of the Internet for access to their users," John Bergmayer, senior staff attorney at Public Knowledge, said in a statement. "This ensures that they are putting the needs of their users first."

Updated at 2:45 p.m. PT with Public Knowledge comment.