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News Link • Cyberspace and the New Economy

How Netflix Is Transforming the Economics of the Web

•, By Klint Finley
This week, the company announced it has reached an agreement with Verizon to connect its service directly to the ISP’s network, a deal similar to the one Netflix reached with Comcast in February. In the past, Netflix delivered its service into Comcast and Verizon through middlemen networks — “transit networks” that provide the backbone for the internet. But in order to ensure that its video streams arrive in homes without too many hiccups, it’s following in the footsteps of Google and Facebook, building a straighter path into ISPs.
The rub is that Netflix doesn’t want to pay. Netflix has been loudly complaining about this sort of deal, saying that Comcast unfairly forced the agreement after allowing transmit network links to “clog up.” Comcast, Netflix says, is setting itself up as a gatekeeper that can charge whatever it likes for access to American homes.

As Comcast looks to acquire another large ISP, Time Warner, the situation has fueled much controversy. The worry is that after the merger, Comcast will have even more gatekeeping power, and this becomes even more of an issue when you consider that, as a cable TV provider and the owner of NBCUniversal, Comcast is also a Netflix competitor.

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