Verizon CEO: Comcast/Netflix Deal ‘A Good Thing’

Lowell McAdam Says Verizon And Netflix Are In Interconnection Talks

Verizon Communications has been in talks with Netflix about a similar type of interconnection and transit deal that the video streaming giant announced with Comcast on Sunday, Verizon CEO Lowell McAdam said Monday during an interview with CNBC’s Dave Faber.

“It’s not a surprise,” he said of the Comcast/Netflix agreement. “Netflix has been talking to everybody, and we’ve been talking to them for about a year.”

McAdam said he was not privy to the financial terms of the Comcast/Netflix agreement, but said “it’s a good thing, because in order to keep the Internet vibrant we have to make the investments.”

Like Comcast, Verizon has been subject to criticism that the quality of Netflix streams delivered over its network have been deteriorating in recent months, with degrading peering points viewed as a primary culprit. Comcast and Netflix are looking to solve that through a new transit/interconnection deal that reportedly will involve Netflix paying Comcast for more direct access to the MSO’s broadband customers.

Verizon and Netflix don’t have a deal in place, but “I would expect that we would” sign a deal, McAdam told Faber. “I’m not here to preannounce and I’m not here to change my hand at the negotiation table, but I think there’s a good opportunity here…Both Reed [Hastings, Netflix’s CEO] and I have talked about it and we think it’s in both of our interests.

McAdam also said the move toward these commercial deals “shows that you don’t need a lot of regulation.”

Those comments come the week after new FCC chairman Tom Wheeler said he is looking to restore the anti-blocking and anti-discrimination network neutrality rules that a D.C. court threw out last month.

While McAdam called the Comcast/Netflix deal a good thing, it has not been so good for the stock of Cogent Communications, which counts Netflix as its largest customer, though the streamer  reportedly represents only 1.7% of revenues, with an expectation that Netflix’s contribution will grow over the next two years. According to Yahoo Finance, company CEO Dave Schaeffer told Citigroup that he believes the cost of the paid interconnection deal between Comcast and Netflix is still above the rate that Cogent charges to Netflix.

Cogent shares were down 5.49% ($2.21) to $38.02 each in mid-day trading Monday.