Netflix Bluffed and Everyone Lost

Last September, National Journal named Netflix the new face of network neutrality. According to one Federal Communications Commission official, Netflix advocates were “screaming their heads off” last year, demanding that the agency reclassify broadband Internet access as a public utility under Title II of the Communications Act.

Now that the agency has actually imposed Title II on broadband, however, Netflix isn’t happy with the FCC. It turns out Netflix was merely using the FCC’s regulatory process to pressure ISPs into giving it 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 on March 4, when Netflix chief financial officer David Wells said the company was disappointed by the ultimate outcome at the FCC. “We were hoping there might be a non-regulated solution,” he said at the 2015 Morgan Stanley Technology, Media & Telecom Conference in San Francisco.

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 its interest was aimed at obtaining free interconnection deals. Wells’s 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.”

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.

Netflix didn’t know that the White House had a pair of aces up its sleeve and was willing to use them.

Netflix bluffed, and everyone lost.

Fred Campbell is executive director of the Center for Boundless Innovation in Technology.