Netflix CEO wades into net neutrality debates
Netflix, the DVD mail-order-company-turned-online-video-giant, is firing back at cable and telecom firms as it weighs in on an increasingly thorny debate over net neutrality.
In a blog Thursday, Netflix published a ranking of how Internet service providers perform in delivering Netflix's online streaming videos. Chartered gets highest marks for delivering videos at high speeds, therefore better resolution. Clearwire is ranked last in the United States (of course, Clearwire is a wireless firm, which isn't exactly an apples to apple comparison). Time Warner Cable, Comcast and Cox rank high.
And after reporting strong fourth-quarter earnings, Netflix CEO Reed Hastings said in a letter to shareholders that the practice by Internet service providers such as Comcast of charging networking firms such as Level 3 more to bring videos and other content to users is "inappropriate.
He didn't mention those firms by name, but his comments were clearly directed at the ongonig salvo between Comcast and Level 3 over charges to deliver traffic to Comcast customers. Level 3 is one of Netflix's partners that deliver online videos to different networks.
Why does this matter? Because it's the most aggressive move yet by Netflix to address a months-long net neutrality debate between Level 3 and ISPs such as Comcast, AT&T and Verizon Communications. Netflix has become the pin cushion of the media and cable industry, seen as a threat to traditional business models for its fast acquisition of online customers who could choose to supplant their cable subscriptions for online video.
Level 3 has filed numerous letters with the FCC, saying Comcast's decision last November to raise prices for traffic exchange appears to violate net neutrality rules. The agency hasn't specifically address how so-called middle mile practices are covered by the rules. Republican members Meredith Attwell Baker and Robert McDowell have warned against regulation of backhaul networks, which would include traffic exchange deals between Level 3 and Comcast.
On Wednesday night, Netflix CEO Reed Hastings waded into the debate for the first time, writing in a letter to shareholders that it is "inappropriate" for ISPs to charge more for traffic to reach customers. Hastings said that even if 20 percent of all peak bandwidth is used by Netflix streaming video, the firm is paying for its traffic to reach ISPs who then deliver traffic to homes. Cable and telecom firms are using their exclusive access to customers to unfairly charge networking partners more, the firms said.
"Little of this traffic goes over the Internet or ISP backbone networks, thereby minimizing ISP costs, avoiding congestion, and improving performance for end-using consumers," Hastings said in the note to shareholders.
And Hastings warned against usage caps by cable and telecom firms -- a practice that was blessed by the Federal Communications Commission in its December net neutrality order. Analysts say that by charging by the gigabyte, consumers may curb how much video they watch online, which would hurt companies such as Netflix and Hulu.com.
Net neutrality complaints pile up
| January 27, 2011; 3:30 PM ET
Categories: Comcast, Early Termination Fees, Internet TV, Net Neutrality, Online Video
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