Netflix & Net Neutrality

5:30 PM -- Steve Effros, a lawyer with a long cable history with the regulatory chops to go with it, is stirring the pot by arguing that Netflix Inc. (Nasdaq: NFLX)'s recent deal to put its own branded button on a range of remote controls could violate the Federal Communications Commission (FCC) 's new network-neutrality rules. (See FCC Votes to Approve Net Neutrality Rules and Netflix Clicks With Remote Controls.)

"At the very least, those who have lobbied so hard for 'network neutrality,' like Public Knowledge , Free Press and Susan Crawford should be up in arms about the dominant streaming video service's plans to preempt a 'fast lane' into consumer's homes by paying for priority," he writes.

Effros is referring to an agreement, announced just before International CES , that will give the Netflix's streaming video service one-click access on remotes from CE giants such as Sony Corp. (NYSE: SNE), Panasonic Corp. (NYSE: PC), and Samsung Corp.

Terms weren't disclosed, but Effros asserts that "there is little doubt that Netflix is paying for that button to be there." [Ed. note: Sources have told Light Reading Cable that Netflix generally doesn't pay to have its service integrated with broadband-connected devices, but it's not known if it's paying anything for the remote-control button. We're asking Netflix to clarify.]

His argument is that the button will be a disadvantage to other streaming video services and have a detrimental effect on the "open Internet" the FCC rules aim to protect. Interestingly enough, he's making it just as service providers, including Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC) and Verizon Communications Inc. (NYSE: VZ), are looking to get on-screen (not remote) buttons of their own on TVs made by TV makers such as Samsung and Sony. (See CES 2011: Samsung Puts MSOs in the Picture and CES 2011: TW Cable, Sony Make IPTV Connection.)

But know also where Effros is coming from… he's a cable guy. He's the former president of the Cable Telecommunications Association (CATA) (it merged with the National Cable & Telecommunications Association (NCTA) in 1999) and is a current principal at Beyond Broadband Technology LLC (BBT) , a cross-MSO downloadable security consortium. (See BBT Buys Into Boxes and BBT Preps Its Own CableCARD .)

Still, he raises an interesting argument that warrants some discussion. But why stop with remote control buttons? Using Effros's logic, does this also mean that TVs and specialized, broadband-connected retail boxes from Roku Inc. and TiVo Inc. (Nasdaq: TIVO) that offer on-screen badges for Netflix, Amazon.com Inc. (Nasdaq: AMZN) and Pandora Media Inc. are also violating the rules because they also provide something that looks like preferred access?

Perhaps, but it looks like what Effros is attempting to establish here is how absurd he thinks the FCC net neutrality rules are. He allows that the Netflix remote button example is a clear demonstration why "those rules are destined to fail, as they do, to just one small subset of the vast Internet ecosystem."

Still, the rules are more targeted to ISPs and mobile carriers, with assurances that they're not blocking applications while being transparent about their network management techniques.

Can the same type of rules apply to device makers that pick and choose which apps grace their navigation screens? How long before some fly-by-night over-the-top video provider starts crying foul to the FCC that device maker XYZ is practicing discrimination by not allowing its service onto a retail device while playing favorites to others that are purportedly paying for placement?

If the new retail era of broadband video indeed makes the CE makers the new gatekeepers, I imagine it may not be long. (See Cable Resparks Retail Play, But Cedes Control .)


— Jeff Baumgartner, Site Editor, Light Reading Cable

Jeff Baumgartner 12/5/2012 | 5:15:38 PM
re: Netflix & Net Neutrality


In this example, the 'fast lane'  is a button that provides direct access to the Netflix streaming service. But usually the term gets applied to a paid express lane on the access network, which appears to be a no-no under the FCC rules.  But does anyone agree that it's open to interpretation… does the Netflix button actually represent a fast lane of sorts, even though it has nothing to do with the quality of the connection that's being used to obtain the content?

seffros 12/5/2012 | 5:15:34 PM
re: Netflix & Net Neutrality

Jeff; Thanks for recognizing the real argument here. I seriously doubt that legally the FCC would find these buttons in violation of their new "net neutrality" rules, but there's little doubt that those buttons create the equivalent of "fast lanes" which is precisely what the advocates of "net neutrality" said was the core reason to create those rules in the fist place. They just can't work if there are so many other ways, as you enumerate, to give preferential treatment to one content supplier over another having nothing to do with the ISP! Regulating just one small part of the ecosystem doesn't work and is likely to be counterproductive. Oh, and if you're right that Netflix has no economic arrangement with the CE manufacturers, what's going to happen when another content provider does go to Sony or Samsung or whoever and pay to have the Netflix button removed and their button added? Is that when folks start to recognize the "pay for priority" issue is much broader than the last mile?  

opticalwatcher 12/5/2012 | 5:15:33 PM
re: Netflix & Net Neutrality

I disagree--a button on a remote has nothing to do with preference for one service's packets over another on a network.

It is called 'network neutrality' not 'remote-control neutrality'.



Jeff Baumgartner 12/5/2012 | 5:15:33 PM
re: Netflix & Net Neutrality

I'd agree that the FCC probably didn't have the Netflix remote control button in mind when it was crafting the rules, but I can see how someone could try to twist the argument to go beyond the last -mile considerations and factor in the home-side devices and their play at walled gardens that do connect to the networks that are supposed to be the subject of the rules.  But Steve's certainly planted the seed on it.  Be interesting to see how long before someone lobs that argument on an official basis at the FCC. JB

seffros 12/5/2012 | 5:15:32 PM
re: Netflix & Net Neutrality

I think some of the commenters are missing the point. To begin with, broadband services were, in the main, NOT regulated until the FCC's latest decision, and the FCC itself acknowledged that in over ten years of development, there were less than a handful of times one could even suggest that "neutrality" had been threatened and in all four of those cases they were resolved without government intervention. Prohibitions against arbitrary blocking of sites have been agreed to for years. Those arguing for comprehensive net neutrality rules do not simply claim that the issue is only with companies that can give preference to their own content. Indeed, of the thousands of ISPs in this country there is only one, Comcast, that has any significant amount of content of its own. AT&T, Verizon, TWC, Quest, and thousands of others do not. So if this "preference" theory only applied to the ISP's which own content, the rules could have been written very narrowly. They weren't. The theory was that rules were needed to "protect" the "open Internet". To prevent "paid priority" generally. I am simply using the Netflix button to point out that there are a multitude of ways to achieve "paid priority" and "walled gardens" (there really are only a handful of major television device manufacturers, by the way, far fewer than the number of ISPs). That the consumer impact is likely to be far more significant with a designated remote button, for instance, than with packet speed management, and that companies are already using various forms of prioritization (Amazon and Netflix using CDNs, for instance) and that therefore the entire theory behind the "protection" afforded by the new FCC rules is misplaced.

ethertype 12/5/2012 | 5:15:32 PM
re: Netflix & Net Neutrality

Oh, c'mon.  This is ridiculous.  Net neutrality is about broadband networks, and the question is whether network owners can create an unfair advantage for themselves in delivering (unregulated) Internet services just because they own the (regulated) network.  There is effective competition in consumer electronics devices and Internet streaming video services and no analogous potential for abuse.  If you really think Netflix is too dominant and can, in effect, force their button onto remotes, take it up with the Antitrust Division of the Justice Department.  This is not an FCC issue.

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