Imagine a restaurant whose most popular dishes are made with fresh tomatoes. Given the large quantity in which these dishes are produced, tomato shortages are frequent, yielding patron complaints. In response, the restaurant’s tomato supplier promises to build a storage facility nearby, in order to insure that the restaurant never runs out of tomatoes.

In a competitive market, the restaurant would gladly accept this offer, fearing that its uneven tomato supply will cause it to lose customers. But, if the restaurant industry resembled today’s broadband-Internet market, the restaurant would be the only place in town that served tomato dishes. Facing no competition, it might try to extort extra payments from the tomato supplier, knowing that without its business the supplier would go under.

That kind of backward logic is the essence of the deal that Comcast and Netflix announced on Sunday. Netflix is one of the world’s most popular Web sites, and you might think that Comcast should be paying Netflix. Instead, the nation’s largest broadband provider threatened that, unless it was paid, Netflix’s streaming videos will stutter or become unplayable. This is the first-ever direct interconnection deal between a broadband provider, like Comcast, and a content company, like Netflix or Google. And it makes clear that Comcast, which recently proposed acquiring Time Warner Cable, has already accumulated too much market power for the health of the Internet economy, and should not be allowed to accrete more.

The deal sets a bad precedent—it will embolden Comcast to extract more tolls from any popular Web company that wants to reach its broadband customers and fears degradation of service. Crucially, there is little that Comcast provides here; the Netflix deal costs it nearly nothing, which is one distinction between a business and a racket. This is made clear by the fact that Netflix—as with the hypothetical tomato supplier—offered every broadband provider a free box that solves the mutual problem of getting high-quality video streams with minimal slowdowns. Most of the small Internet providers that face actual competition and seem to want a good experience for their customers, like Cablevision, British Telecom, and Google Fiber, use the box. But Comcast is different: it knows that it has market power based on its lack of real competition and its control over access to millions of customers—in market jargon, this is known as “termination monopoly.”

Once a cable company’s infrastructure is in place, it costs it almost nothing to provide actual service. However, unlike traditional utilities, which are regulated, cable operators are free to charge exorbitant fees for their services. The problem is that charging monopoly prices for things like gas, electricity, or Internet connection, which are inputs into many businesses, is, essentially, a tax on the larger economy in the long term.

Two policy implications follow from the Comcast-Netflix deal. First, as predicted by the professor Kevin Werbach and the economist Gregory Rose, interconnection is now a key issue for the future of a vibrant Internet. The new Federal Communications Commission chairman, Tom Wheeler, is in the process of resuscitating net neutrality. But interconnection creates almost identical issues: it serves as a means by which broadband providers can use the threat of degrading service to extract cash from content providers, and to favor of some companies over others.

Second, Comcast’s ability to stare down a firm as popular as Netflix suggests that the cable provider should not be allowed to gain even more size and power through its proposed acquisition of Time Warner. The larger Comcast gets, the more of a menace it will become to the rest of the Internet economy. Comcast is already demanding payment whenever it detects weakness. The math is simple: the bigger it gets, the more credible its threats become, and the more money it drains from everyone.

Tim Wu is a professor at Columbia Law School and the author of “The Master Switch.” A longtime advocate for net neutrality, he served as a senior adviser to the Federal Trade Commission; the chair of Free Press, an Internet advocacy organization; and a fellow at Google.

Above: A Comcast distribution center in Miramar, Florida. Photograph by Joe Raedle/Getty.