Netflix CEO: Some Big ISPs ‘Extracting A Toll Because They Can’

Netflix agreed to an interconnection deal with Comcast last month that aims to boost the quality of its video streams in the MSO’s markets, but that doesn’t mean Netflix was thrilled to be on the paying end of it.

In fact, it’s now clear that Netflix believes it acquiesced amid the power wielded by the nation’s largest broadband ISP.

Marking Netflix’s strongest stance on topic of network neutrality, CEO Reed Hastings posted a blog on Thursday arguing that “stronger’ network  neutrality rules are needed, and that ISPs should be prevented from charging an “arbitrary tax” for interconnections to services like Netflix.

“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. The traditional form of net neutrality which was recently overturned by a Verizon lawsuit is important, but insufficient,” Hastings wrote.

“This weak net neutrality isn't enough to protect an open, competitive Internet; a stronger form of net neutrality is required,” Hastings added. “Strong net neutrality additionally prevents ISPs from charging a toll for interconnection to services like Netflix, YouTube, or Skype, or intermediaries such as Cogent, Akamai or Level 3, to deliver the services and data requested by ISP residential subscribers. Instead, they must provide sufficient access to their network without charge.”

Hastings’ letter comes as FCC chairman Tom Wheeler looks to restore recently overturned network neutrality rules, and echoes the argument put forth this week by Level 3 Communications, which has waged peering battles of its own. Also this week, Sen. Al Franken (D-Minn.) urged the Justice Department to look at network neutrality issues in its review of the proposed Comcast-Time Warner Cable deal.

In his post, Hastings praised Cablevision Systems for practicing “strong net neutrality.” Cablevision, a member of Netflix’s Open Connect program, which relies on Netflix-supplied edge caches instead of paid interconnection deals, has historically placed high in Netflix’s monthly ISP Speed Index.

Hasting’s letter also called out data showing that streams delivered to Comcast, Time Warner Cable, Verizon FiOS and AT&T U-verse have seen streaming qualities degrade in recent months. Of that group, Verizon and AT&T have already stated that they are pursuing the kind of paid peering deals that Comcast got with Netflix.

“Once Netflix agrees to pay the ISP interconnection fees, however, sufficient capacity is made available and high quality service for consumers is restored,” Hastings argued. “If this kind of leverage is effective against Netflix, which is pretty large, imagine the plight of smaller services today and in the future. 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 consumer experience.”

But in the meantime, he said Netflix will, in some cases, “pay the toll to the powerful ISPs to protect our consumer experience.”

He offered this comment about his new business partner. “Comcast has been an industry leader in supporting weak net neutrality, and we hope they’ll support strong net neutrality as well.”

Comcast, per the conditions of the NBCUniversal acquisition, must adhere to the original FCC Open Internet rules until 2018. In a statement issued in response to Hastings' post, Comcast EVP David Cohen said those rules were never intended to cover peering and Internet connection.

“There has been no company that has had a stronger commitment to openness of the Internet than Comcast," he said. "We supported the FCC’s Open Internet rules because they struck the appropriate balance between consumer protection and reasonable network management rights for ISPs.  We are now the only ISP in the country that is bound by them.

“The Open Internet rules never were designed to deal with peering and Internet interconnection, which have been an essential part of the growth of the Internet for two decades. Providers like Netflix have always paid for their interconnection to the Internet and have always had ample options to ensure that their customers receive an optimal performance through all ISPs at a fair price.  We are happy that Comcast and Netflix were able to reach an amicable, market-based solution to our interconnection issues and believe that our agreement demonstrates the effectiveness of the market as a mechanism to deal with these matters.”

Some ISPs, citing the inequality of traffic being sent out versus what’s being sent in, have sought commercial interconnection deals in place of existing settlement-free arrangements.

Hastings also attacked that argument, claiming there is “an uncomfortable silence” when the company asks these ISPs if Netflix would quality for a no-fee interconnect if it changed its service to upload as much data as it downloads.

“Big ISPs aren't paying money to services like online backup that generate more upstream than downstream traffic. Data direction, in other words, has nothing to do with costs,” he wrote.