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Reed Hastings Reignites Net Neutrality Furor

20 Mar, 2014 By: Erik Gruenwedel

Netflix CEO Reed Hastings

Comcast counters that it is the only ISP in the country still bound by net neutrality

Netflix co-founder and CEO Reed Hastings March 20 took to the company’s blog to rail against what he perceives is a push by major ISPs to sustain “weak net neutrality,” enabling them to charge fees for interconnection to subscription streaming services.

Hastings was referring to an appeals court’s strike of federal net neutrality law, and Netflix’s decision to pay Comcast a fee to ensure smoother streaming speeds for its SVOD customers. The CEO thinks the two events are related. Indeed, Verizon and AT&T said they would seek to extract similar peering agreements with Netflix — a leveraged play that rubs Hastings the wrong way. 

“If this kind of leverage is effective against Netflix, which is pretty large, imagine the plight of smaller services today and in the future,” Hastings wrote. “Roughly the same arbitrary tax is demanded from the intermediaries such as Cogent and Level 3, who supply millions of websites with connectivity, leading to a poor customer experience.”

The CEO’s post was itself strategic, as Comcast is trying to clear regulatory hurdles in its $45 billion acquisition of Time Warner Cable. The last time Hastings publicly blogged displeasure, it was about perceived inequitable data charges levied streaming Netflix through his Comcast account compared to the ISP’s Streampix service. The FCC, subsequently, took notice.

Notably, Comcast, as part of its deal with the FCC when it acquired NBC Universal, agreed to abide by net neutrality, even if it was overturned in court.

Regardless, ISPs argue that Netflix accounts for upwards of 30% of peak residential Internet traffic, and, as a result, should shoulder more of the transportation costs. Verizon CFO Fran Shammo recently said services such as Netflix are “dumping data,” or, in other words, using broadband channels like their own personal freeways.

Hastings counters that Netflix doesn’t send content data unless its subscribers request it. He added that ISPs should, in the least, be willing to share in the increased revenue derived from fees.

“So, cost-sharing [streaming] makes no sense. When an ISP sells a consumer a 10 or 50 megabits-per-second Internet package, the consumer should get that rate, no matter where the data is coming from,” Hastings wrote.

The CEO added that ISPs don’t charge each other for interconnection based on the belief that each ISP shares in the costs of broadband distribution. Hastings said that when Netflix approaches ISPs about qualifying for non-fee interconnection by moving to peer-to-peer content delivery, “there is an uncomfortable silence,” he wrote.

Hastings said that with stronger net neutrality law, ISPs could sell enhanced (and more lucrative) broadband packages. Instead, he argues, ISPs are going for the quick dollar.

“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,” he wrote. “While in the short term Netflix will in cases reluctantly pay large ISPs to ensure a high-quality member experience, we will continue to fight for the Internet the world needs and deserves.”

Comcast countered that it remains committed to net neutrality in an effort to strike an appropriate balance between consumer protection and reasonable network management rights.

"There has been no company that has had a stronger commitment to openness of the Internet than Comcast,” David Cohen, EVP of Comcast, said in a statement. “We are now the only ISP in the country that is bound by them.”

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