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Comcast and Netflix Reach Deal on Service

Comcast, the country’s largest cable and broadband provider, and Netflix, the giant television and movie streaming service, announced an agreement Sunday in which Netflix will pay Comcast for faster and more reliable access to Comcast’s subscribers.

The deal is a milestone in the history of the Internet, where content providers like Netflix generally have not had to pay for access to the customers of a broadband provider.

But the growing power of broadband companies like Comcast, Verizon and AT&T has given those companies increased leverage over sites whose traffic gobbles up chunks of a network’s capacity. Netflix is one of those sites, accounting for nearly 30 percent of all Internet traffic at peak hours.

The agreement comes just 10 days after Comcast agreed to buy Time Warner Cable for $45 billion, an acquisition that would make Comcast the cable provider to nearly one-third of American homes and the high-speed Internet company for close to 40 percent. Federal regulators are expected to scrutinize whether that deal would thwart competition among cable and Internet providers.

It is also unclear whether the Comcast-Netflix deal violates the principles of what is known as net neutrality — where all content providers have equal and free access to consumers. People close to the deal characterize it as a common arrangement. Content companies frequently pay a middleman to carry traffic to a broadband provider, which then moves through its pipes and into a consumer’s home.

In a news release announcing the deal, the companies said, “Netflix receives no preferential network treatment under the multiyear agreement.” Details were not disclosed, but a person close to the companies said it involved annual payments of several million dollars.

Others, including Tim Wu, a Columbia Law School professor and advocate for net neutrality, said the interconnection agreement between Comcast and Netflix was one of the first such arrangements where a broadband provider like Comcast has extracted payment to send specific content through the “on ramp” to its network.

“This is the water in the basement for the Internet industry,” Mr. Wu said, the first in what could be a flood of such arrangements. “I think it is going to be bad for consumers,” he added, because such costs are often passed through to the customer.

One fear is that if such deals become common, only the wealthiest content companies will be able to afford to pay for them, which could stifle the next Netflix from ever getting off the ground.

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A Comcast distribution center’s cables and routers, which send video and more to customers.Credit...Joe Raedle/Getty Images

The agreement also follows a January ruling from a federal appeals court that struck down the Federal Communications Commission’s net neutrality rules, saying the agency overstepped its authority. This type of deal between Comcast and Netflix might have been forbidden under a liberal reading of the F.C.C.’s rules.

The announcement on Sunday confirmed reports that had trickled out late last week, as close watchers of Internet traffic began to detect a more direct Internet path of Netflix videos to Comcast customers.

In recent months, Netflix had reported that delivery speed of its content to Comcast subscribers had declined by more than 25 percent, resulting in frequent interruptions and delays for customers trying to stream television shows and movies delivered through Netflix. Customers of other providers, including Verizon, also reported delays.

Comcast, Verizon and other Internet service providers denied that they were playing any role in slowing down traffic. Instead, they blamed the intermediaries that Netflix used to deliver its content to Comcast on its way to consumers. They said that those middlemen — companies like Cogent Communications — were trying to shove too much data through too small a pipe.

The agreement, which is expected to be put fully into effect in the coming weeks, had been many months in the making, well before the Time Warner Cable announcement. The contours of a deal were reached after a meeting between Brian L. Roberts, chief executive of Comcast, and Reed Hastings, the chief executive of Netflix, at the International Consumer Electronics Show in Las Vegas last month, as well as the engineering teams of both companies, said sources close to the deal.

The new arrangement will deliver an “even better user experience to consumers, while also allowing for future growth in Netflix traffic,” the companies said in their joint statement Sunday. Netflix will now deliver its content directly to Comcast rather than going through an intermediary.

These types of deals, known as “paid peering,” are typically struck between companies that manage the plumbing of the Internet, unseen by consumers. Netflix does far more than that, offering original programming and features like TV and movie recommendations for users based on their previous choices.

Netflix will now essentially have its own on ramp to Comcast customers. That is different from paying to be moved through the pipes more quickly, a deal known as “paid prioritization” that is generally seen as a net-neutrality violation.

That the technical, arcane details of how streaming videos arrive on a customer’s screen are the focus of corporate announcements and media coverage speaks to the outsize importance of Comcast and Netflix in how Americans now watch movies and television.

Craig Aaron, president of the consumer advocacy group Free Press, saw the Netflix deal as more reason to prevent Comcast from growing. “As a consumer, this is a really opaque process — being unable to really know who’s paying what to whom,” he said. “All you know as a consumer is that you are really paying in the end.”

A version of this article appears in print on  , Section B, Page 1 of the New York edition with the headline: Comcast and Netflix Reach Deal on Service. Order Reprints | Today’s Paper | Subscribe

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