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Netflix and Comcast have hammered out a network-sharing agreement. / Elise Amendola AP

Corrections and clarifications: The accompanying video about the interconnect agreement between Netflix and Comcast could have been clearer in explaining that while Netflix downloads would result in a faster streaming experience for Comcast customers than before, Netflix receives no preferential network treatment under the agreement.

SAN FRANCISCO -- The network-sharing agreement between Comcast and Netflix has likely buried the idea that providers of high-speed Internet connections into U.S. homes have to take into account anything but market forces when setting prices for their service.

In other words, Net Neutrality is dead.

Its end was foreshadowed last month by an appellate court ruling in Washington, D.C., that threw out rules barring phone companies and cable giants from giving preferential treatment to certain content providers on their networks.

Now that the largest cable provider, Comcast, and perhaps the largest user of consumer bandwidth in Netflix have struck a deal, any legislation or executive action to authorize new federal telecom rules will have very little momentum in Washington.

This week's agreement is the most significant between a digital entertainment provider and an owner of copper wiring since the Net Neutrality court ruling last month.

It marks the end of the concept of an open or free Internet and presages a more-competitive landscape for digital entertainment and information.

Look for more mergers and acquisitions such as Comcast's proposed offer for Time Warner Cable, which will give Philadelphia-based Comcast more than 30 million subscribers.

Any cable provider, phone company, wireless operator or satellite provider owns a network that can now be used to provide digital entertainment to consumers in a less-regulated market.

Investment usually follows such deregulation, so it's easy to see more deals that will tie up wireless and satellite providers, or tech and telecom firms and assets, such as Verizon's recent purchase of Intel's digital TV unit.

Deregulated markets usually lead to lower prices in the long term, but only where there is full-blown market-based competition.

And since the U.S. Internet services market is built on top of the U.S. telecom infrastructure, more than half the country has access to either high-speed cable Internet or phone-based DSL service, but not both.

Comcast, in its latest annual filing, said that it competes with phone companies for such service in only 45% of its market footprint.

That means one of two things: Either fans of Web-based video will have to get used to paying more than $8 a month for their favorite shows, or Netflix investors will have to get used to lower profit margins.

Comcast, after all, now controls access to some rather large chunk of Netflix's own 33 million subscribers, thanks to their new peering agreement.

This peering agreement between the old telecom world of cable wires and providers of digital entertainment is not the first of its kind, of course.

Comcast and Netflix have already signed plenty of these so-called peering agreements with intermediaries -- owners of either fiber optic cables or Internet server farms -- that sit between U.S. consumers and online movies and TV shows.

Those guarantee certain levels of service ?? measured in digital bits per dollar -- for network users by network owners.

With Net Neutrality protections removed, and Netflix's former peering costs being nominal, it's a good bet the company will be paying more for its network privileges in the future, not less.

Whether it can pass those higher costs onto consumers, rather than have the cost of any future network-sharing agreements eat into profits, may depend on how competitive this new, wide-open Internet turns out to be.

There's no reason to think Comcast's rivals, including AT&T and Verizon, won't insist on similar agreements now for access to their high-speed Internet customers.

Meanwhile, Netflix rivals such as Apple and Amazon will also likely see their on-demand movie services subject to the same peering contracts.

And in the telecom industry, such guaranteed levels of service usually come with a price.

John Shinal has covered tech and financial markets for 15 years at Bloomberg, BusinessWeek, the San Francisco Chronicle, Dow Jones MarketWatch, Wall Street Journal Digital Network and others. Follow him on Twitter: @johnshinal.



Copyright 2014 USATODAY.com

Read the original story: Netflix, Comcast put final nail in Net Neutrality's coffin

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