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Reed Hastings lambasts 'big ISPs' that charge 'tolls' for direct connections to their broadband networks and calls for stronger net neutrality rules in US, spurring retort from Comcast.

Netflix CEO Wants 'Strong' Net Neutrality

Alan Breznick
3/24/2014
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So much for the notion that Comcast bought Netflix's silence on net neutrality rules for at least the next year by striking a favorable peering deal with the online video king.

Defying industry speculation that his company would now give Comcast Corp. (Nasdaq: CMCSA, CMCSK) a pass on net neutrality until its deal Time Warner Cable Inc. (NYSE: TWC) was approved, Netflix Inc. (Nasdaq: NFLX) CEO Reed Hastings is pushing for tighter net neutrality rules to protect US Internet video providers.

In a blog post on the Netflix website late last week, Hastings lashed out at the "big ISPs" that he claims charge "tolls" for direct interconnections with their broadband networks. He also made a passionate case for "stronger" neutrality rules that would keep broadband providers from charging the kind of interconnection fees that Netflix recently agreed to pay Comcast for the next few years. (See Comcast-Netflix Peering Deal: A Game-Changer? and Comcast-Netflix: It's Really All About TWC.)

In his lengthy post, Hastings, who had said little on the net neutrality subject before, contended that the US needs net neutrality rules stringent enough that "ISPs such as AT&T and Comcast don't restrict, influence or otherwise meddle with the choices consumers make."

Although the "traditional form of net neutrality" enacted by the Federal Communications Commission (FCC) but overturned by the federal courts is "important," he said, it's "insufficient" and must be strengthened. (See The Dangerous Reaction to Netflix-Comcast.)

"This weak net neutrality isn't enough to protect an open, competitive Internet; a stronger net neutrality is required," Hastings asserted. Further, he said, a strong net neutrality policy "prevents ISPs from charging a toll for interconnection to services like Netflix, YouTube, or Skype, or intermediaries such as Cogent, Akamai, or Level 3, to deliver the services and data requested by ISP residential subscribers. Instead, they must provide sufficient access to their networks without charge."

Seemingly damning Comcast with faint praise, Hastings termed the giant MSO "an industry leader in supporting weak net neutrality." He called on Comcast to "support strong net neutrality as well."

Hastings also contrasted Comcast's peering payment policy with such other major US MSOs as Cablevision Systems Corp. (NYSE: CVC), which don't charge a fee for such links. He noted that Cablevision already practices strong net neutrality by providing direct interconnection for no fee, enabling its high-speed data subscribers to enjoy "outstanding quality" for Netflix and other online video streaming services.

"But on other big ISPs, due to a lack of sufficient interconnectivity, Netflix performance has been constrained, subjecting consumers who pay a lot of money for high-speed Internet to high buffering rates, long wait times, and poor video quality," he wrote.

Although he didn't name those big ISPs in his post, an accompanying graph from a Wall Street Journal article showed how Netflix's prime-time streaming performance has declined on Comcast, Verizon Communications Inc. (NYSE: VZ)'s FiOS, Time Warner Cable, and AT&T Inc. (NYSE: T) U-verse networks in recent months.

In a sharp written response to Hastings' post, Comcast defended its peering policies and rejected Hastings' argument. The MSO noted that, unlike every other ISP in the nation, it carries out the net neutrality rules that the FCC enacted. But Comcast did not note that, unlike every other ISP in the country, it has to do that, due to the conditions imposed upon it when federal regulators approved its purchase of NBC Universal .

"There has been no company that has had a stronger commitment to openness of the Internet than Comcast," said Comcast EVP David Cohen in the statement. "We supported the FCC's Open Internet rules because they struck the appropriate balance between consumer protection and reasonable network management rights for ISPs."

Pointing out that the Open Internet rules "never were designed to deal with peering and Internet interconnection," Cohen also argued that online video providers like Netflix "have always paid for their interconnection to the Internet and have always had ample options to ensure that their customers receive an optimal performance through all ISPs at a fair price." He said the peering deal negotiated by Comcast and Netflix "demonstrates the effectiveness of the market as a mechanism to deal with these matters."

In his post, Hastings said Netflix will "reluctantly," in some cases, "pay the toll to the powerful ISPs to protect our consumer experience," at least in the short term, because of their clout and reach. But he made it clear that his company would not go quietly into the night, warning that Netflix "will continue to fight for the Internet the world needs and deserves."

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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Atlantis-dude
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Atlantis-dude,
User Rank: Light Sabre
4/28/2014 | 4:54:51 PM
Death and Taxes
Nothing is certain but ...

A toll is just a form of tax
mendyk
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mendyk,
User Rank: Light Sabre
3/24/2014 | 1:04:35 PM
Re: Reed between the lines
I usually have my container of Morton's handy when analyzing comments from Reed Hastings.
brookseven
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brookseven,
User Rank: Light Sabre
3/24/2014 | 1:01:40 PM
Re: Reed between the lines
Duh/Dennis,

One thing that I found interesting in the blog post was the Netflix offered to do symmetrical traffic and was turned down.  Now again that is according to the blog post.

The implication was (of course) that even peering wasn't good enough when Netflix was involved.  I have no idea of the veracity of the statements.

seven

 
mendyk
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mendyk,
User Rank: Light Sabre
3/24/2014 | 12:33:50 PM
Re: Reed between the lines
Tiering will happen because peering doesn't work, for exactly the reason you cite.
Duh!
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Duh!,
User Rank: Light Sabre
3/24/2014 | 12:16:02 PM
Re: Reed between the lines
It's about peering, not tiering.  Very easy to conflate the two, when it serves one's purposes to do so.  Settlement-free peering in the Internet has always been conditioned on roughly symmetrical traffic. 

Let's be clear.  Hastings is looking to externalize costs of his growth onto the big ISPs.  And he's waving the bloody shirt of "Network Neutrality" for support.
mendyk
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50%
mendyk,
User Rank: Light Sabre
3/24/2014 | 11:22:26 AM
Reed between the lines
Of course Reed Hastings is against any sort of Internet service tiering. It destroys his company's margins.
brookseven
50%
50%
brookseven,
User Rank: Light Sabre
3/24/2014 | 10:46:55 AM
Re: Good for Netflix
rgrutz,

Breaking them up won't create competition. Your asking for a 3rd or 4th wireline network to be built.  The current narrative is that these carriers are on their path to going out of business due to a margin squeeze.  So, I don't see that happening.

I don't actually believe the narrative but I don't see anybody really willing to do a nationwide buildout.  If AT&T and Century start deploying GPON, then I suspect that will be the end of Google Fiber.

seven
rgrutza600
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50%
rgrutza600,
User Rank: Lightning
3/24/2014 | 10:32:28 AM
Good for Netflix
I don't trust or like Comcast, and I have nowhere to turn, but ATT.  Which charges the same for the same services.  This duopoly is killing consumers and innovation.   Break them up into fifty pieces each and sell those pieces to Google, Amazon, Apple, Facebook, Microsoft, etc...
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