Netflix Bluffed on Net Neutrality and Everyone Lost

Posted by | March 05, 2015 | Broadband Internet | 4 Comments

http://oandfstudios.com/treasure-island/ Last September, the National Journal named Netflix the new face of net neutrality. According to one FCC official, Netflix advocates were “screaming their heads off” last last year demanding that the agency reclassify broadband Internet access as a public utility service under “Title II” of the Communications Act.

that site Now that the agency has actually imposed Title II on broadband, however, Netflix isn’t happy with the FCC. It turns out that Netflix was merely using the FCC’s regulatory process to pressure ISPs into giving Netflix special interconnection deals.

We should all be outraged to discover that a major shift in our nation’s communications policy was driven by duplicitous corporate maneuvering. But it would be a mistake to blame Netflix for the folly of our policymakers. Corporate posturing and specious arguments designed to gain a corporate advantage are nothing new in Washington, and independent, expert agencies are ordinarily expected to see through it. The fault lies with a White House that was too eager to embrace Netflix’s sound bites for political reasons, and an FCC that was too easily bent to the White House’s will.

Netflix revealed its Title II advocacy was a ruse last Wednesday, when Netflix chief financial officer David Wells said the company was disappointed by the ultimate outcome at the FCC.

“‘Were we pleased it pushed to Title II? Probably not,’ Wells said at the conference. ‘We were hoping there might be a non-regulated solution.’”

Wells didn’t say what “non-regulated solution” Netflix had hoped to achieve, but anyone who followed last year’s shenanigans between Netflix and major ISPs knows that Netflix’s interest in net neutrality was aimed at obtaining free interconnection deals. Wells’ statement makes clear that Netflix hoped its public push for Title II would force ISPs to capitulate to its demands.

Netflix had hinted at this strategy in its January 2014 statement on the federal court decision overturning the FCC’s 2010 net neutrality rules.

“To the degree that ISPs adhere to a meaningful voluntary code of conduct, less regulation is warranted. To the degree that some aggressive ISPs start impeding specific data flows, more regulation would clearly be needed.”

When this statement is read with David Well’s remarks, it appears that a voluntary industry compromise on interconnection was Netflix’s real goal in the net neutrality proceeding, not Title II.

Like most everyone else, it appears Netflix assumed the FCC was unlikely to reclassify broadband as a Title II service, but hoped that its vocal support for Title II would create enough buzz to pressure ISPs into making voluntary concessions on interconnection.

But, like most everyone else, it appears Netflix didn’t foresee the White House’s political plan to overrule FCC Chairman Tom Wheeler on Title II. Once the President put his marker down, any hope Netflix had of reaching a voluntary compromise on its pet net neutrality issue was taken off the table.

It should be no surprise to industry experts that Netflix is unhappy about full-blown Title II regulation of the Internet. Though it might benefit Netflix in some respects, Title II is also likely to have an adverse impact on Netflix and other so-called edge providers. For example, Netflix just reached a deal to launch its service in Australia that will exempt its content from contributing to a customer’s broadband data usage — a practice known as “zero-rating.” Taking advantage of zero rating will likely help Netflix compete against more established players in Australia’s video market. But, Tim Berners-Lee, the Internet luminary that testified at the FCC meeting when it adopted Title II, has warned that zero-rating is a threat to net neutrality, and advocates like Public Knowledge are expected to use Title II to challenge zero rating at the FCC.

It was inevitable that a Title II approach to net neutrality would ensnare content providers like Netflix. It appears Netflix was aware of this risk when it chose to play the media and the FCC like a hand of cards. What Netflix didn’t know was that the White House had a pair of aces up its sleeve and was willing to use them. Netflix bluffed, and everyone lost.

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