Google Inc Supports Netflix, Inc., Questions Cable Providers Charges

The need for speed and issues with co-located servers extends beyond high frequency trading and extends into the Internet, as Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) today teamed up with Netflix, Inc. (NASDAQ:NFLX) against cable providers, who are charging additional to provide streaming video content at high speeds for consumers.

Do cable providers want movies, TV shows to remain best viewed through cable TV?

The cable providers, who benefit if cable and not the Internet is the primary method to watch movies, TV dramas and news, are slowing down the Internet speed for those firms that don’t pay extra to have fast direct connections to the servers.

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In a blog post today, Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) sided with those such as Netflix, Inc. (NASDAQ:NFLX) who say it is incumbent on all Internet service providers to provide equal internet access to all and live up to their user agreements. Google said it would not charge firms like Netflix additional to stream video content through its servers.

Not charging extra for high speed video streaming is “win-win-win situation” says Google

“We don’t charge (extra for high speed connections to streaming video content) because it’s really a win-win-win situation. It’s good for content providers because they can deliver really high-quality streaming video to their customers,” Jeffrey Burgan, Director of Network Engineering at Google, wrote in the blog post.

Netflix, Inc. (NASDAQ:NFLX) has been required to pay Internet service providers such as Comcast Corporation (NASDAQ:CMCSA) (NASDAQ:CMCSK) and Verizon Communications Inc. (NYSE:VZ) to rent space in their server facility so they can establish a direct connection to the “last mile” of internet users.  Because video users typically don’t view more than one video at a time, “We don’t make money from peering or colocation,” Burgan wrote.  “Video traffic doesn’t bog down or change the way we manage our network in any meaningful way — so why not help enable it?”

Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) and Netflix, Inc. (NASDAQ:NFLX) make the same arguments that it is incumbent on Internet service providers to provide such fast connections free of charge because they have already agreed to do so.  Comcast Corporation (NASDAQ:CMCSA) (NASDAQ:CMCSK), on the other hand, has argued that there are costs to delivering large packets of video content into the home and that those delivering the video content, such as Netflix, should pay the price, not the customers of the Internet service provider.

Federal Communications Commission Chairman Tom Wheeler said his agency will look into complaints from Netflix, Inc. (NASDAQ:NFLX) regarding what are known as “paid peering agreements.”

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com