The Wall Street Journal reported today that the end of the Internet is imminent as Netflix and Comcast reached a so-called “pact” to improve streaming. Or so you might imagine from the paranoid hysterical coverage.

Obvious disclaimer alert: I worked at Comcast for two years and did things with CDNs at almost every place I’ve ever been, including Comcast. I’m undoubtedly still aware of confidential internal information which I’m obligated to protect and won’t discuss here. Dark, brooding information about Comcast’s plans for the future, no doubt.

But, I’m here writing that I don’t believe one word of the fear-mongering. At least, not the way the stories are being written, which are informed by the fifty-eight word press release issued by the companies yesterday.

Working collaboratively over many months, the companies have established a more direct connection between Netflix and Comcast, similar to other networks, that’s already delivering an even better user experience to consumers, while also allowing for future growth in Netflix traffic. Netflix receives no preferential network treatment under the multi-year agreement, terms of which are not being disclosed.

Let’s take the tin foil off our heads and break this down. I’ll help to translate from Cable-company-ese as necessary:

“Working collaboratively over many months”

Netflix streaming has been growing like gangbusters. This created a problem for Netflix, because they had to pay CDN providers to deliver that traffic based on usage, and usage was going through the roof. To keep costs down, they did what most smart media companies do, and shopped around for the lowest delivery costs.

While most traditional CDN providers have paid for access to eyeball networks via programs like Akamai’s AANP program (which is over 15 years old at this point), one of the new Netflix CDN providers was Level3, which benefitted from being a major carrier and network operator, and didn’t have plans to pay Comcast (or anybody else).

This dispute made it into the media back in 2010, and ultimately was settled last year. But it forced Netflix to go another way: they started becoming their own CDN (which they call OpenConnect). In spite of the name, it isn’t open to anybody’s content but Netflix’s, which is pre-positioned on hardware they provide to ISPs who host their gear. Basically, they re-invented the Akamai AANP thing from the 90s. In sexy Netflix red.

But Comcast and Verizon have never accepted CDN vendor gear into their networks and weren’t about to start now, so this went nowhere. Traffic increased, connections degraded at peak times, customers were unhappy on both sides, and undoubtedly talks started again about Doing Something About The Problem.

“the companies have established a more direct connection between Netflix and Comcast”

I’m not sure what a “more direct connection” means, but from what’s been posted it appears Netflix bought hosting, built a network, and connected it to Comcast’s network at a major peering point in San Jose. This connected Netflix’s CDN to Comcast’s backbone directly, rather than via carriers like Level3, Verizon Business, etc.

“similar to other networks”

Yup. I bet if Comcast were to release a list of the networks connected at that same point, you’d see every CDN and every major network provider. And, the people not delivering roughly symmetrical amounts of traffic are probably paying for the privilege.

“that’s already delivering an even better user experience to consumers”

I think that means “we know the bottleneck was at the edge of our network, and not in our backbone, regional networks, or last mile”. This makes sense — Comcast rolled out DOCSIS 3 over 2 years back and that has tons of last mile bandwidth. Regional networks probably will eventually get congested, but since there are only a handful of major peering points in the United States to exchange traffic, that’s certainly where things get congested first.

Comcast reported around 17 million Internet customers last year. The big peering points (Ashburn DC2, San Jose SV1, New York’s 111 8th Ave, Chicago’s 350 E Cermak, and a few others) number in single digits in the US.

“while also allowing for future growth in Netflix traffic”

I bet this means “We’ll sell them more ports if they need them”. Which makes sense, since the alternative is messy for everybody.

“Netflix receives no preferential network treatment”

There are a lot of tricks you can play with cable networks to make traffic work better. This gets done with cable voice traffic, for example, to guarantee high quality service and make sure things like 911 work. Almost all internet traffic, however, gets prioritized as “best effort” which basically means nothing special gets done to it. This only really impacts that last mile, which I speculate isn’t really the congestion point here anyway. Remember: 17 million Internet subscribers, half-dozen big peering points. So, even if Comcast or Netflix wanted to do something like this, it probably wouldn’t do any good.

Still, this feels like something a paranoid Comcast attorney inserted to make sure nobody thought Network Neutrality was at stake. Please suppress your giggles.

“under the multi-year agreement”

This isn’t a trial. This isn’t temporary. They have a deal and it’s multi-year, which suggest this will resolve this problem for a while. At least until the congestion migrates elsewhere. I’m looking at you, Verizon.

“terms of which are not being disclosed”

Did you really expect otherwise?

I think the big story here is that Netflix has made an aggressive move to become its own CDN, taking traffic and revenue away from competitive players like Akamai, Level3, Limelight, Edgecast, CDNetworks, and whomever else started a CDN this month. This always made sense for the really big players, but had really challenging economics because you ended up having to pay for transit, and transit cost about the same as CDN services.

I assume that Comcast is charging Netflix something. But I wouldn’t be surprised if it was competitive .. after all, Netflix probably wouldn’t agree to pay more than the going rate in a long-term agreement. They’d scream bloody murder and probably get some sympathy. So, this means that their strategy — and the general strategy of building your own CDN for larger video streamers — makes sense again. They join YouTube in this space, and YouTube got to ride Google’s golden coattails to connectivity.

Interesting times ahead…