Netflix CEO Reed Hastings will pay big internet providers for better and more reliable access to the streaming movie service, but it's not something he is happy about.
Just weeks after Netflix inked a deal with Comcast to ensure that its users would have faster and more reliable access, Hastings called out the providers for demanding "tolls" for better connections that ensure a good user experience. "When an ISP sells a consumer a 10 or 50 megabits-per-second internet package, the consumer should get that rate, no matter where the data is coming from," Hastings said.
Hastings' statement also comes at a time when regulators are taking a hard look at Comcast, which is attempting to buy Time Warner Cable and create one of the largest broadband providers in the United States. Such a deal would theoretically further limit the options of broadband customers and give companies like Comcast much more power in the competitive landscape — particularly considering a recent ruling struck down vital portions of the FCC's open internet rules.
"If this kind of leverage is effective against Netflix, which is pretty large, imagine the plight of smaller services today and in the future," Hastings wrote.
While Netflix has a clear incentive to further the cause of net neutrality, the timing of Hastings' statement suggests it's targeted at regulators who are expected to thoroughly examine the Comcast-Time Warner Cable merger. Hastings notes that Comcast has been a supporter of "weak" net neutrality, but stronger net neutrality is necessary in the long run. However, in the short run, Netflix will pay the aforementioned "tolls" in order to ensure a good experience for its users.
Here's the part where he spells it out in his blog post:
Without strong net neutrality, big ISPs can demand potentially escalating fees for the interconnection required to deliver high quality service. The big ISPs can make these demands -- driving up costs and prices for everyone else -- because of their market position. For any given U.S. household, there is often only one or two choices for getting high-speed Internet* access and that's unlikely to change. Furthermore, Internet access is often bundled with other services making it challenging to switch ISPs. It is this lack of consumer choice that leads to the need for strong net neutrality.
Netflix believes strong net neutrality is critical, but in the near term we will in cases pay the toll to the powerful ISPs to protect our consumer experience. When we do so, we don't pay for priority access against competitors, just for interconnection. A few weeks ago, we agreed to pay Comcast and our members are now getting a good experience again. Comcast has been an industry leader in supporting weak net neutrality, and we hope they'll support strong net neutrality as well.
Update — March 20, 7:47 p.m. ET: Comcast has responded with a statement on its website from Executive Vice President and Chief Diversity Officer David L. Cohen, saying, "We supported the FCC's Open Internet rules because they struck the appropriate balance between consumer protection and reasonable network management rights for ISPs. We are now the only ISP in the country that is bound by them."
The statement continues, "The Open Internet rules never were designed to deal with peering and Internet interconnection, which have been an essential part of the growth of the Internet for two decades. 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."
Read the whole statement here.