People are watching ... a lot of Netflix.
People are watching ... a lot of Netflix. - 
Listen To The Story

It used to be, way back when — say, two years ago — that when you clicked on a Netflix video, it would take a winding journey from a server in one location, through wires owned by any number of companies, until finally it hit your internet service provider. These days, that journey is a whole lot shorter.   

“A few feet,” says Richard Bennett, a visiting fellow at the American Enterprise Institute. 

More often than not, Netflix just connects a wire from its server to boxes owned by ISPs like Comcast, Verizon or Time Warner. They’re generally in the same building. 

This is called interconnection, and it’s how most of our internet traffic gets to us now. It’s more reliable and efficient. Think: less buffering. And, increasingly, content companies like Apple, Google, and, of course, Netflix are paying fees for this service.  

This is where things get controversial.

“In America, where these very few ISPs have so much market power that they can extract payments, it's just like the mob,” says Susan Crawford, who co-directs Harvard’s Berkman Center for Internet and Society. "Just say, 'you’re not going to reach our subscribers unless you pay us.'” 

The Federal Communications Commission is getting more complaints about these deals. And, now, it has to decide what — if anything — to do about them. It’s not sure whether interconnection should be part of net neutrality regulations expected next month, tackled separately later on, or left alone completely.

That’s what many ISPs would like. 

“We all get the services we want,” says Matthew Brill, a partner at Latham & Watkins who represents many big ISPs. “There’s a real danger that if government gets in the middle of those relationships, it will distort things in a way that ends up very harmful for consumers.” 

But what if Netflix videos are basically unwatchable unless Netflix pays an ISP for a direct connection. Is that fair?

“Comcast could say, well, you’re using a third of our traffic, and we could say, well, we’re providing a third of the value your subscribers are getting, so you should pay us instead,” says Ken Florance, Netflix’s vice president of content delivery.  

What Netflix really wants is to pay nothing. It will be up to the FCC or Congress to decide whether they have a role in these disputes.

“I think the best compliment I can give is not to say how much your programs have taught me (a ton), but how much Marketplace has motivated me to go out and teach myself.” – Michael in Arlington, VA

As a nonprofit news organization, what matters to us is the same thing that matters to you: being a source for trustworthy, independent news that makes people smarter about business and the economy. So if Marketplace has helped you understand the economy better, make more informed financial decisions or just encouraged you to think differently, we’re asking you to give a little something back.

Become a Marketplace Investor today – in whatever amount is right for you – and keep public service journalism strong. We’re grateful for your support.