Netflix Weighs Next Steps Following FCC’s Title II Vote

The Federal Communications Commission’s vote last week to reclassify broadband under Title II introduces new provisions covering paid interconnection between Internet service providers and “edge providers,” such as Netflix, but it’s still unclear if the new rules will have a retroactive effect on existing deals.

Netflix, the popular over-the-top video provider that has reluctantly agreed to enter paid interconnection deals with some of the nation’s largest ISPs, cheered the vote, which opens the door to a case-by-case review of interconnection- related complaints.

“Today’s order is a meaningful step towards ensuring ISPs cannot shift bad conduct upstream to where they interconnect with content providers like Netflix,” the company said in its statement. “Net-neutrality rules are only as strong as their weakest link, and it’s incumbent on the FCC to ensure these interconnection points aren’t used to end-run the principles of an open Internet.”

But does Netflix plan to lodge any complaints to the FCC in the wake of last Thursday’s vote? Stay tuned.

“We will review the order and decide next steps,” a Netflix spokeswoman said via email.

The FCC won’t release the new rules for weeks, so it’s not entirely clear what recourse Netflix might have with respect to the paid interconnection agreements it has already signed with Comcast, Time Warner Cable, AT&T and Verizon.

The rules would, for the first time, give the commission the authority “to hear complaints and take appropriate enforcement action if necessary, if it determines the interconnection activities of ISPs are not just and reasonable.”

How it determines that remains the question. Dan Rayburn, executive vice president of and principal analyst at Frost & Sullivan, noted that the FCC could look at everything from the going rate of transit to third-party content delivery network pricing to determine what is considered just and reasonable with paid interconnection agreements. “What is the baseline metric?” he asked. “We don’t know.”

Rayburn also said he believes that Netflix will have difficulty arguing its pact with Comcast is unfair, noting that the deal is already sweetened with locked-in multi-year pricing and service- level agreements covering installation, packet loss and latency.

Ahead of last week’s vote, Netflix urged the FCC to include paid interconnection deals within the scope of the new rules, labeling such agreements an “arbitrary tax” on it and other OTT video service providers. Netflix’s preference is that ISPs join Open Connect, a private CDN program that relies on Netflix-supplied edge caches.