People are dropping traditional cable TV to watch shows on the internet, but at the same time we depend on cable companies to provide internet access. You see a conflict here? That may explain why you’re having trouble getting streaming video from Netflix, especially if your internet connection comes from Verizon. Verizon wants more money to carry Netflix traffic, but denies it has anything to do with Verizon’s competing video-streaming service Redbox Instant.
The battle puts a company named Cogent in the middle, both literally and figuratively. Cogent provides bandwidth transit between internet content providers such as Netflix and ISPs such as Verizon. The details of connections and payments are a bit technical. Suffice it to say that Verizon claims the series of tubes is full and they need more money. Cogent says that Verizon could easily open more tubes, but won’t until they get more money. And if Verizon gets more money, then every cable company (there aren’t that many of them) will demand more money from every bandwidth provider, all of which will be passed along to the consumer, either through higher ISP charges or higher Netflix charges. Or both.
The Federal Communications Commission hasn't regulated the peering market, although the topic could come up during proceedings on the proposed Comcast/Time Warner Cable merger. FCC Chairman Tom Wheeler has supported the idea of "two-sided networks" in which ISPs like Verizon can charge both Netflix and their home customers. Wheeler wants to impose some type of net neutrality rules on Internet access, but that would apply only to the "last mile" of connectivity from consumer ISPs to homes, and not the interconnection agreements at issue here.