Netflix has agreed to pay Comcast, the nations largest home Internet carrier, to ensure its online videos are streamed smoothly.
The arrangement highlights the vast power of Comcast, which is in the middle of an ambitious expansion effort, and how the firms dominance in the broadband Internet market can hold sway over how consumers ultimately experience the Web.
In a multiyear deal, Netflix will pay Comcast to connect its servers to Comcasts network, removing third parties that bog down the delivery of its streaming-video traffic.
Terms of the arrangement were not disclosed, but the deal could set the stage for similar payments by Netflix and other deep-pocketed Web companies to the Internet service providers who deliver content into homes and on mobile devices, analysts say.
This deal opens a lot of different doors so that any firm has to pay more for back-end connections in order to take advantage of higher last-mile speeds into homes, said Harold Feld, of the consumer advocacy group Public Knowledge.
Comcast said that the deal does not give any preferential treatment to Netflixs videos.
The firm said it regularly charges Web companies and other third parties that route traffic to its 22 million home subscribers.
As part of a condition to its 2011 merger with NBC Universal, Comcast is prohibited from blocking or slowing down traffic for a profit.
But the deal is controversial because it shows Comcasts sway over the media and technology industries. With its bid for Time Warner Cable, Comcast would have 30 million U.S. Internet subscribers, in every major U.S. market, making it powerful in any negotiations for the carriage of programs and apps to cable television and Internet users, analysts say.
Verizon has reportedly slowed down traffic for Netflix video streaming in a similar behind-the-scenes dispute over fees on the routing of Internet traffic.
After months of talks, Comcast chief executive Brian Roberts and Netflix chief Reed Hastings reached a deal on payments at the January International Consumer Electronics Show in Las Vegas.
Consumer advocates criticized the companies for putting consumers in the middle of their massive moneymaking contract disputes.
Subscribers of Comcast and other Internet carriers have seen their bills steadily rise while regularly encountering frustratingly slow speeds, often below what is promised when signing contracts.