Netflix: Strong-Arming the Net-Neutrality Debate

The following is an edited excerpt from a June 12 blog post by National Cable & Telecommunications Association president and CEO Michael Powell.

In the ongoing air wars over net neutrality, personal attack and comedic fodder have sadly obscured an accurate portrayal of the issues now confronting the Federal Communications Commission in the wake of the U.S. Court of Appeals for the D.C. Circuit’s decision in Verizon v. FCC. Instead of following the old adage of “when in danger, when in doubt, run in circles, scream and shout,” perhaps we ought to take a breath and refocus serious attention on the task before the agency.

For starters, let’s acknowledge that there are no “net neutrality” rules at present other than the FCC’s 2010 “transparency rule” that survived court review and that ISPs continue to follow today. In this light, we ought to see that inflammatory attacks claiming that the FCC is about to “wreck” net neutrality are nothing but hyperbolic hot air. You can’t “wreck” rules that no longer exist.

Second, as parties seek to manufacture a continuing din of discontent, we ought to acknowledge what we are not fighting about. Though it’s seldom reported, it’s worth remembering that the cable industry has long supported an open Internet and, in fact, supported the 2010 Open Internet rules adopted by the FCC. To be fair, some may have questioned the necessity of rules in the absence of real harms, but the industry was willing to operate under that regime since it did not alter our ability or incentives to build and expand robust broadband networks. Additionally, ISPs have stated quite clearly that they don’t see much of a business case for the kind of “fast-lane, slowlane” strategy that so many insist is at hand.

Fast-forward to today. As the FCC looks to follow the D.C. Circuit’s invitation to restore net-neutrality rules, one might think that the task before us is simple. But alas, nothing in this debate ever is.

Sadly, other Internet players — most notably, Netflix — are now seeking to leverage this proceeding to serve their own particular corporate ends. They do not seek to restore prior rules; they seek to “move the goal posts” and dramatically expand what net neutrality means. They want to protect their profits by ensuring that the disproportionate impact caused by delivering traffic to their customers is spread across all broadband subscribers and not just those who actually use the service. In other words, if there is any additional cost to accommodating Netflix traffic, everyone’s broadband bill should go up rather than increase the price of the Netflix subscription. Why should everyone subsidize fans of House of Cards? They are not seeking “strong” net neutrality; they are seeking to “strong-arm” net neutrality into satisfying a separate and distinct objective.

In fact, the myriad business arrangements by which thousands of ISPs, content providers, transit providers and content distribution networks exchange Internet traffic were not part of the FCC’s 2010 Open Internet proceeding and should not be now.

Expanding the scope of this proceeding is troubling not only because it threatens progress on a viable replacement regime for the rules that were struck down, but also because the allegations consciously omit Netflix’s own culpability and control over the performance of its service. Netflix has alleged that ISPs have intentionally degraded interconnection links used by its chosen transit providers and that they have done so for the purpose of forcing Netflix to agree to pay tolls for access to ISP customers. It further suggests that its decision to enter into contracts with Comcast and Verizon were made under duress and that it made this sacrifice because that was the only way to ensure a quality viewing experience for its customers. And until recently chastened to relent, Netflix attempted to convince Verizon customers that poor Netflix performance was solely attributable to congestion in the local access network.

The implication that Netfl ix has no control over the performance experienced by its customers is wrong. In fact, recent analysis by Sandvine confi rms the exact opposite — that is, the strategic routing choices made by Netflix have a significant effect on the performance a customer receives. By choosing to send large portions of its traffic down routes that were illequipped to handle the load (and by choosing not to route through independent, available transit providers), Netflix’s performance on those routes unsurprisingly declined.

Fixing these performance problems did not require Netflix to do a deal with Verizon or Comcast. Netfl ix could have spread its traffic over additional third-party transit links, rather than trying to send the vast majority of its traffic over Cogent’s network. Or it could have sent some of its traffic through the third party CDNs that had successfully carried its traffic in high-quality to ISPs for years. In none of those cases would Netflix have had to pay Comcast, or Verizon — or any residential ISP. That it chose to do so ultimately suggests Netflix got a better deal by directly peering with a residential ISP than with any of the middlemen. But its choice should not obscure the fact that it had (and still has) other competitive options, ones that the overwhelming majority of edge providers use and have generally used, for years, to achieve high quality, with low cost and without incident.

Allowing the net-neutrality conversation to be hijacked into a peering debate is a mistake that will only cloud the commission’s ability to move forward in the Open Internet proceeding. Netflix’s peering gambit is primarily about improving its own economics and says more about Netflix’s power than about any ISPs. We should stay focused on the last-mile issues that gave rise to the Open Internet rules in the first place, and ensure a clear path forward to reinstate new rules in line with the court’s direction.