Netflix signs deal for faster data speed with Verizon

For the second time in as many months, online streaming giant Netflix signs a deal with a major U.S. telecom firm for faster data transmission over its network.
Netflix has signed a deal to ensure faster transmission for its data over Verizon's network. (Paul Sakuma/Associated Press)

For the second time in as many months, online streaming giant Netflix has signed a deal with a major U.S. telecom firm for faster data transmission over its network.

Netflix and Verizon Communications have signed a pact to speed up delivery of Netflix's high-definition video that gets streamed over the latter's FiOS broadband network.

Although neither side is saying how much the payment might be worth, both companies made statements Tuesday confirming that a deal is in place. Spokesman Joris Evers said Tuesday Netflix hopes its deal with Verizon, "will improve performance for our joint customers over the coming months."

Verizon spokesman Bob Varettoni said although, "the terms are confidential, this agreement is designed to deliver improved service for our combined customers." 

In February, Netflix signed a similar deal with Verizon rival Comcast to ensure speedy data transmission.

Clogged pipes

Although Netflix founder and CEO Reed Hastings has publicly complained about having to pay internet service providers for direct connections, it's not clear the deals will actually cost Netflix more money. That's because Netflix has already been paying content-delivery fees to third-party vendors such as Cogent Communications Group to transmit its data more efficiently, and faster.

And even though they're business partners in a sense, Netflix and the major cable and internet companies aren't exactly on the same team. Netflix opposes Comcast's $45-billion takeover of Time Warner because it says it will consolidate too much ownership of content and broadcast transmission potential in one place.

In a blog post last week, Comcast asserted that its deal will enable Netflix to reduce its expenses. Netflix didn't directly address that claim in its own blog post deriding Comcast last week, but rather accused Comcast of "double dipping" by charging to deliver content that many of its subscribers want to watch.

Netflix has grown quickly to have almost 37 million digital subscribers. Its U.S. customers pay $8 a month for endless streaming of content from the company's vast database of television shows and movies. Netflix has become so popular that it generates nearly one-third of the evening traffic on the internet in the U.S., according to the research firm Sandvine.

In March, after the Comcast deal, Netflix said video on its network was streaming at an average of 2.5 megabits per second, a 66 per cent increase from January. The higher speeds translate into a richer and steadier picture, but the extra quality can leave internet infrastructure groaning under the pressure of handling increased data.

Netflix's video streamed at an average of 1.91 megabits per second on Verizon's internet service in March.

The Netflix traffic is straining some networks and raising tensions with internet service providers who argue they shouldn't have to shoulder all the financial burdens for handling all the extra traffic.

Netflix announced last month it will begin charging new customers $1 or $2 more per month starting in July, in part to deal with rising costs.

With files from The Associated Press