Netflix: Why We’ll Pay the Toll

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The following is an edited excerpt from a blog post by Netflix CEO Reed Hastings.

The essence of net neutrality is that ISPs such as AT&T and Comcast don’t restrict, influence or otherwise meddle with the choices consumers make. … This weak net neutrality isn’t enough to protect an open, competitive Internet; a stronger form of net neutrality is required.

Without strong net neutrality, big ISPs can demand potentially escalating fees for the interconnection required to deliver high-quality service. The big ISPs can make these demands — driving up costs and prices for everyone else — because of their market position. For any given U.S. household, there is often only one or two choices for getting high-speed Internet access, and that’s unlikely to change. …

Netflix believes strong net neutrality is critical, but in the near term, we will in cases pay the toll to the powerful ISPs to protect our consumer experience. When we do so, we don’t pay for priority access against competitors, just for interconnection. A few weeks ago, we agreed to pay Comcast, and our members are now getting a good experience again. Comcast has been an industry leader in supporting weak net neutrality, and we hope they’ll support strong net neutrality as well.

ISPs sometimes point to data showing that Netflix members account for about 30% of peak residential Internet traffic, so the ISPs want us to share in their costs. But they don’t also offer for Netflix or similar services to share in the ISP revenue, so cost-sharing makes no sense.

Some ISPs say that Netflix is unilaterally “dumping as much volume” (Verizon CFO) as it wants onto their networks. Netflix isn’t “dumping” data; it’s satisfying requests made by ISP customers who pay a lot of money for high-speed Internet. Netflix doesn’t send data unless members request a movie or TV show.

Some big ISPs are extracting a toll because they can — they effectively control access to millions of consumers and are willing to sacrifice the interests of their own customers to press Netflix and others to pay. Though they have the scale and power to do this, they should realize it is in their long-term interest to back strong net neutrality.

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