April 15, 2024

Netflix supports net neutrality rules in fight against ISPs – The Hollywood Reporter

Netflix goes public again and takes a stance on net neutrality.

The company was notably absent from the fight to preserve net neutrality six years ago when it was shot down by the Trump administration. But as the government prepares to reinstate the rules, the streaming giant is escalating the issue and presenting its arguments to the agency.

Netflix, in comments filed Wednesday with the Federal Communications Commission, backed proposals to prohibit Internet service providers from imposing additional fees to prevent their content from being blocked or limited. In the absence of federal open Internet protections, he argued that ISPs, many of which own or are affiliated with streaming services through special offers and packages, will resort to degrading the quality of competitors’ content or raising their costs.

Of course, the landscape in 2024 is very different than in 2010, when the Obama administration first passed net neutrality rules. It’s even a very different world than in 2017, when Trump’s FCC repealed those rules.

In 2010, Netflix had 20 million subscribers and in 2017 it had 117.5 million. It now has more than 247 million streaming subscribers and its video distribution has become a utility for many Americans, the first place they go for video.

And while the streaming competition in 2010 consisted of Hulu, YouTube and almost no one else, in 2024 there are plenty of streaming options, including, notably, services owned by or affiliated with companies that could be subject to company neutrality rules. grid.

Comcast, the largest U.S. broadband Internet provider, owns NBCUniversal, which in turn owns the Peacock streaming service. And several Internet providers struck deals with streaming services, offering them free to their customers or bundling them with other offerings, raising concerns that those services could be given priority for valuable (and expensive) bandwidth.

“Our business is built on a symbiotic relationship between a thriving creative industry and a thriving Internet ecosystem,” Netflix wrote in its FCC filing. “Our 247 million Netflix members in more than 190 countries depend on us to deliver a wide range of great entertainment and a well-functioning Internet to access this content. At the same time, demand for broadband connectivity is driven by the availability of great online content and services, and many Internet Service Providers (“ISPs”) promote their Broadband Internet Access Services (“BIAS” ) using Netflix content. Regulatory policies that support an open Internet, with strong investment in infrastructure, competition, and continued innovation, best serve consumers. “Netflix supports open Internet rules.”

As it happens, Comcast and Netflix already have a complicated history over net neutrality. In 2014, Netflix struck a deal with Comcast to provide a faster connection to its subscribers, and then-CEO Reed Hastings wrote a blog post denouncing the practice:

“If this kind of influence is effective against Netflix, which is quite large, imagine the plight of smaller services today and in the future,” he wrote. Now, of course, Netflix is ​​so big that you can be sure users would revolt if internet providers downgraded the service.

In October, the FCC voted to begin a process that would restore net neutrality rules after they were repealed in 2017 under former President Donald Trump’s administration. Netflix, which was outspoken on the issue just a few years earlier when it raised concerns about how Comcast was handling its Internet traffic, largely stayed out of that fight, with CEO Reed Hastings suggesting the streamer is not worried because it’s “big enough.” to get the agreements we want.”

Since then, as consumers increasingly turned to watching over-the-top content (thus avoiding the services of ISPs, not only on the computer but also on television), it became clear that such providers, such as Netflix, They now compete with ISPs.

In a nod to the changing landscape of entertainment consumption, Netflix said ISPs “have a clear incentive to take advantage of their affiliated services.”

The FCC’s proposed rules recognize that “many major ISPs are affiliated with [over-the-top media] services or continue to offer competitive, vertically integrated services.” As part of its regulation, the agency is considering prohibiting them from charging websites or content delivery services a fee to prevent their content from being blocked or throttled, as it did in 2015.

“The threat of ISP traffic manipulation undermines competition between ISP-affiliated and non-ISP-affiliated content providers by forcing independent companies, such as Netflix, to pay an access fee to the ISP or suffer congestion and quality degradation.” compared to its competitors who are affiliated with that ISP and do not have to pay this fee,” the company said in a writing.

The Netherlands’ handling of net neutrality rules may be instructive. In 2016, a Dutch ISP launched an online content service but was unable to grant preferential treatment under new open internet protections. Because of these rules, the company chose to double the size of its data limits, in part, to accommodate its new video offering. If it had been allowed to favor its own service, it could have exercised its market power to encourage consumers to subscribe to its offering rather than that of its competitors.

Netflix also warned about South Korea’s pivot in 2016, which allowed ISPs to charge additional fees to third-party providers. This, in turn, drove investment away from the country, with Twitch shutting down its operations in the region starting this year, among other things.

Court precedent largely supports Netflix’s arguments that ISPs have the market power to restrict competitors’ traffic. The U.S. Court of Appeals for the District of Columbia recognized in 2017 that they have this power because “all end users generally access the Internet through a single broadband provider” and “that provider operates as a ‘terminal monopoly.’ .[y].”

Part of this control, Netflix argued, arises from the dynamic that it is easy to change content providers but difficult to change ISPs. Netflix users, for example, can cancel their subscriptions online without having to call the company or schedule a visit with a technician. On the contrary, switching costs and barriers are high when it comes to ISPs. Perhaps most problematic is that many Americans do not have an alternative broadband provider because they live in an area with limited or no ISP options. Even when there is competition, it is often insufficient to deter “non-neutral behavior” given the “broadband duopoly” in most regions, the company said.

“Today’s online entertainment market is intensely competitive, which benefits consumers,” Netflix wrote. “However, fostering that competition depends on protecting the open Internet.”

After net neutrality rules were repealed, a patchwork of state laws has mostly preserved open Internet protections. Almost immediately after the FCC rescinded the regulation, Hawaii, Montana, New Jersey, New York, Rhode Island and Vermont, among other states, issued executive orders requiring companies seeking to contract with those states to confirm that they would comply with the regulation. agency network prior to 2018. neutrality rules.

Read Netflix’s filing with the FCC below.

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