NetFlix and Comcast have announced a deal whereby NetFlix will pay to peer into the Comcast network. Numerous articles popped up yesterday talking about how this is the end of network neutrality. But I am not so sure about that. In order to understand this, let me talk a bit about how peering works today. Peering is when two networks decide to make a direct connection between the networks rather than connecting in a more traditional way through the open Internet.

There are two kinds of connections that are typically made. One is local peering. This is when two networks who are geographically close decide to exchange data traffic. This typically benefits both parties. Let’s look at an example of why. Let’s assume the two parties are medium sized carriers, one a telephone company and the other a cable company that are competing in the same community. There is always a considerable amount of Internet traffic that is conducted within a community. People browse the websites of stores in their own community. People do on-line banking with local banks. People work at home and want to get data into and out of their employer’s local networks.

Normally each of these carriers would deliver traffic between their two networks, say between a customer on one network and a bank on the other one by sending this traffic to the open Internet. Each company will have a connection to the Internet, through some wholesale provider that will terminate eventually at one of the major Internet pops like Chicago or Dallas. And so when a customer wants to connect with his bank, the data will travel out through the first network to the major pop where it will be handed off to the data stream going back to the second network.

Such a connection is said to make at least several hops, meaning the times that the message is handled by a data router somewhere in the network in order to figure out where it is going. The more hops, the slower the connection. But local peering solves this problem because the traffic can be exchanged locally and goes straight from one carrier to the other without being sent first to some distant POP. This is a simplistic description because peering arrangements are usually more complicated than this. They are more likely to be between the underlying transport carriers that handles the traffic for the telephone company and the cable company. But peering will make the connection more direct than it would be under normal network circumstances.

The other kind of peering is one that saves money. I have many clients who peer with Google because Google and all of its various subsidiaries accounts for a significant percentage of the traffic on any Internet connection. My clients have done the math and see that it is cheaper to make a direct connection with Google rather than paying their underlying carrier to get it to Google. Anybody who peers with Google this way must pay out of their own pockets to get to a Google POP, probably including paying for the equipment at the POP needed to make the connection. But this kind of peering often results in a significant savings. Most people’s connection with Google is very much one-directional. There is usually a lot more traffic coming from Google than going to Google.

We don’t have the details of the Comcast / NetFlix deal to be certain what the arrangement is. But up until now it’s clear that the two sides have not agreed to a direct peering arrangement. One has to assume that the connection from NetFlix is nearly all in one direction – to download video to customers who sit on the Comcast network. Without a direct peering arrangement the traffic must get to Comcast through intermediate carriers and often would be routed in ways that would slow up the traffic, as is any traffic on the open Internet.

I would assume that there is not one big Comcast network, but instead there are pockets of Comcast all over the country. I would assume that for NetFlix to fully peer with Comcast that they are going to have to make connections with these various pockets, all at NetFlix cost. And if this was normal peering, NetFlix would also be expected to pay for the connections into the Comcast network including owning or somehow paying for the large amount of equipment needed to terminate their traffic.

Again, the two sides aren’t talking about the details. But I would expect it to cost NetFlix something to get their traffic directly to all parts of the Comcast network. That is how normal peering works. Where the line of network neutrality will have been crossed is if NetFlix has to pay a lot more for this connection than what others pay. But since this deal has been under negotiations for a year, one has to assume that both parties had the old network neutrality rules in mine as it was negotiated. I can certainly envision an arrangement that is more like normal peering than of a big violation of the principles of network neutrality. If it was the latter I would expect NetFlix to be putting up a big stink. Network neutrality benefits companies like NetFlix tremendously, and if they aren’t complaining then there is a good chance that this is peering like normal and not a giant money grab by Comcast.