FCC launches inquiry into Comcast, Verizon, Netflix 'peering deals'

After back-and-forth blog posts, passive-aggressive error messages, and a highly publicized PR battle, FCC chairman Tom Wheeler has launched an investigation into the source of Netflix's and other streaming video services’ lagging loading speeds.

Jonathan Ernst/Reuters/File
Federal Communications Commission Chairman Tom Wheeler and FCC Commissioner Ajit Pai testify on Capitol Hill in Washington in March. The FCC is considering new rules that could affect 'net neutrality.'

Netflix and other sites have blamed major Internet Service Providers (ISP) such as Comcast and Verizon for slowing down their video buffer times unless they pay up for an Internet “fast lane.”

Up until this point, the argument has been without a federal mediator, but on Friday Federal Communication Commission Chairman Tom Wheeler says the commission is launching an inquiry into how Internet traffic is currently routed, and what it could mean for the new net neutrality regulations.

"The bottom line is that consumers need to understand what is occurring when the Internet service they've paid for does not adequately deliver the content they desire, especially content they've also paid for," Mr. Wheeler says in a statement.

In the last year, Netflix customers may have noticed slower load times or inconsistent picture quality while watching a TV show or movie on the streaming video website. Netflix contends the blame lies on major ISPs, especially Comcast and Verizon, who asked Netflix to pay more to make up for its massive streaming video traffic.

Netflix has more than 36 million subscribers in the US and at peak viewing hours, Netflix users account for up to one-third of all Internet traffic, according to research firm Sandvine. Combined, Comcast and Verizon have 30 million subscribers nationwide. Both companies believe that Netflix should pay extra for causing extra strain on broadband networks. Netflix, on the other hand, says that move is bad for Internet company competition, as smaller start-up companies wouldn’t be able to pay the extra fees needed in order to ensure their video is played well. Netflix also says the extra cost will end up passed onto consumers.

The FCC inquiry will also investigate the details of the current direct partnerships Netflix has with Comcast and Verizon in order to keep streaming smoothed. Called “peering deals,” both telecom companies say these agreements actually save Netflix money because they pay the companies directly instead of paying intermediaries. They say Netflix is continuing to harp regulators to crack down on these tolls so the company can pay very little for taking up the majority of the bandwidth. At the moment, peering deals aren’t a direct concern of net neutrality talks, but could play a larger role depending on what the investigation turns up.

Initially, some have been worried about Mr. Wheeler’s control of the FCC’s net neutrality talks, given he previously held several positions as a lobbyist for the cable and wireless industries. However, he has attempted to disprove his perceived loyalties with moves such as this one, that pry open the lid on uncharted corners of the Internet in order to see who may be causing an unnecessary ruckus or abusing power.

Netflix, Comcast, and Verizon all released statements applauding the effort for bringing more transparency to the issue.

The hubbub over net neutrality began in January when a federal court struck down the rules adopted by the FCC in 2010. 

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