Netflix Will Pay Comcast For Faster Speeds, Ensuring Netflix Video Streams Smoothly To Comcast Customers

Netflix Inc. (NASDAQ:NFLX) has agreed to pay Comcast Corp. (NASDAQ:CMCSA) for faster Internet speeds, marking the first time that Netflix is shelling out for faster speeds in the U.S. after customers had complained about slow service, Reuters reports.

The landmark pact, which was announced on Sunday, may very well set a precedent for Netflix's dealings with other broadband providers. The agreement ensures that Netflix movies and television shows stream smoothly to Comcast customers, according to the Wall Street Journal. In exchange for payment, Netflix will get direct access to Comcast's broadband network.

Netflix, which has struck comparable deals with Cablevision and Cox (Netflix did not pay for these connections), has more more than 44 million subscribers worldwide.

The arrangement between Netflix and Comcast raises a key question: Will other content companies have to pay for improved service?

It follows Comcast's recent agreement to buy Time Warner Cable for $45 billion, a deal that's sure to draw scrutiny from United States antitrust enforcers. The combined company would grab nearly a 30 percent share of U.S. pay television.

The teaming of Netflix and Comcast arrives as federal regulators grapple with "Net neutrality," the principle that Internet service providers and governments should treat all data on the Web equally, and not discriminate or charge differentially by user, content, site, platform, application, type of attached equipment and communication modes. And it also comes at a time when broadband providers must face whether or not they can slow down traffic to certain websites, and perhaps make content companies pay for speedier Web service, according to Reuters.

People familiar with the deal between Netflix and Comcast said Netflix chief Executive Reed Hastings did not want streaming speeds to deteriorate more and turn into a larger problem for customers. In a statement confirming the broad outlines of the arrangements, the companies Sunday said the agreement would provide "Comcast's U.S. broadband customers with a high-quality Netflix video experience for years to come."

Last week, the Federal Communications Commission said it intends to rewrite the rules after a U.S. court struck down the FCC's previous version.

Millions watch movies and TV shows via streaming services from Netflix, Amazon and other companies.

In a statement, Netflix and Comcast said that they have been "working collaboratively over many months" to strike an agreement. The companies said that Netflix will not receive preferential network treatment, Reuters reports.

The deal stipulates that Netflix will deliver its movies and TV shows to Comcast's broadband network directly, not via third-party providers, thus enabling quicker streaming speeds.