Weekly Update

Netflix plays the net neutrality card

Seemingly apropos of nothing last Sunday, Netflix CEO Reed Hastings took to Facebook to take a poke at Comcast over its application of monthly data caps.

“I spent the weekend enjoying four good internet video apps on my Xbox: Netflix, HBO GO, Xfinity, and Hulu,” Hastings wrote. “When I watch video on my Xbox from three of these four apps, it counts against my Comcast internet cap. When I watch through Comcast’s Xfinity app, however, it does not count against my Comcast internet cap…In what way is this neutral?”

It was hardly idle grumbling on Hastings’ part, however.  In fact, anti-Comcast Facebook postings have become something of a pattern for the Netflix CEO. Last month, he used his Facebook page to complain about Comcast’s blocking of HBO Go on his Xbox and Roku.

“When I try to use HBO GO on my Xbox or on my Roku, I find that Comcast is blocking HBO GO, and won’t let me use HBO GO on these TV-connected devices,” Hastings wrote then. “Comcast: I’m paying you a lot of money for HBO, so please let me watch HBO GO on my TV.”

Indeed, the complaints appear to be having an effect. Shortly after last months’ post appeared, Comcast added support for HBO Go to Xbox and Roku. As for Hastings’ latest complaint, the FCC said Monday it is “monitoring the situation” and “takes seriously any allegations of violations of our open Internet rules.”

Yet as Hastings surely knows, there is no real danger that he or anyone else is going to run up against Comcast’s 250 GB per month cap from using Hulu or Netflix. According to Comcast at least, the 250 GB threshold is high enough that it does not affect 99 percent of the ISP’s broadband subscribers. Moreover, there’s little evidence that Comcast has ever actually enforced the cap by charging users more money when they do manage to exceed it.

In a filing with the Federal Communications Commission last year, in fact, Netflix itself acknowledged that high data caps pose no real threat to over-the-top providers:

Moves by network operators toward pay-per-gigabyte pricing plans could adversely impact and discriminate against OVDs…If such plans are implemented by means of a large cap that affects only the heaviest of users, we believe they would have little adverse impact on Netflix subscribers.

So if Hastings isn’t really worried about Comcast’s data cap, why the carefully plotted calling out? There is real long-term danger to Netflix lurking in the FCC’s current net neutrality rules, but it lies in the rules’ failure to regulate those parts of the Internet the consumer doesn’t see, like peering agreements between last-mile ISPs and content distribution networks (CDNs). While Netflix would dearly love to see the FCC revisit those rules, the agency isn’t likely to do so absent some clear evidence of consumer harm.

Hastings’ Facebook postings are about building a case that Comcast’s network management practices generally are causing consumer harm.

As I and other commentators noted at the time the real danger facing Netflix and other over-the-top content providers is not that ISPs will block consumer access to their content on the front end but that ISPs could block content distributors’ access to last-mile networks at the back end. But the FCC’s rules do nothing to address that threat.

Netflix and its CDN Level 3, in fact, remain locked in a dispute with Comcast over Comcast’s demand for payment from Level 3 to make additional data ports available to accommodate increased Netflix traffic.  the FCC issued its net neutrality regulations, the rules do little to lessen the leverage of last-mile gatekeepers over Internet content providers. Similar disputes have since broken out between Level 3 and Verizon and AT&T.

Without doing anything to block consumers’ access to over-the-top content services, in other words, ISPs can significantly affect online distributors’ costs, making it harder for them to compete with the ISP’s own content offerings.

While that clearly could harm Netflix, unless it can be linked to a clear consumer harm as well Netflix isn’t likely to get much relief from the FCC or any other government regulator. By airing his grievances on a public forum like Facebook, Hastings is hoping to build a drumbeat of consumer complaints about Comcast’s network management practices to catch the ear of regulators.

Question of the week

Should the FCC try to regulate peering agreements between network operators?