Netflix Chief Says Broadband Providers Should Interconnect for Free
Rules Needed to Ensure Providers Can’t Keep Charging Netflix a Fee to Connect
Broadband companies should be required to connect their networks to major content providers such as Netflix for free, Netflix Inc. CEO Reed Hastings said Thursday.
In a blog post published on the company’s website, Mr. Hastings called for rules to that ensure big broadband providers like Comcast Corp. can’t keep charging companies such as Netflix a fee to connect directly to their networks-a practice known as paid interconnection, or peering.
In the post, Mr. Hastings publicly acknowledged that Netflix recently struck a paid peering deal with Comcast, which he said had improved service for Netflix subscribers with Comcast internet service. While both sides have characterized the payments as relatively small, it is the principle of paid peering that concerns Netflix in the long term. Mr. Hastings said such deals could open the door for Internet service providers (ISPs) to charge Netflix and other content providers escalating fees to reach consumers.
“If this kind of leverage is effective against Netflix, which is pretty large, imagine the plight of smaller services today and in the future,” Mr. Hastings said.
Mr. Hastings framed peering as crucial to the principle of net neutrality, which states that Internet service providers can’t discriminate between two similar content providers. Earlier this year Verizon Communications Inc., convinced the U.S. Court of Appeals for the D.C. Circuit to throw out the Federal Communications Commission’s net neutrality rules, but FCC Chairman Tom Wheeler has signaled he intends to issue new rules in the coming months.
“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,” Mr. Hastings said. “Without strong net neutrality, big ISPs can demand potentially escalating fees for the interconnection required to deliver high quality service.”
Netflix has urged the FCC to ensure that its new net neutrality rules cover peering. In addition, Netflix could push for the FCC to mandate free peering as a condition for approval of Comcast’s $45 billion acquisition of Time Warner Cable Inc. That deal would expand Comcast’s footprint as the nation’s leading broadband provider.
A Netflix spokesman said no-fee interconnection is essential for an open, competitive Internet.
“We hope the big ISPs embrace strong net neutrality on their own,” he said. “To the extent companies don’t do the right thing, government will have to consider stepping up its obligations to protect consumers.”
In a statement, Comcast Executive Vice President David Cohen said “the open Internet rules never were designed to deal with peering and Internet interconnection” and noted that “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.”
Mr. Cohen said Comcast is happy that it was able to reach an “amicable, market-based” interconnection agreement with Netflix and believes the deal “demonstrates the effectiveness of the market as a mechanism to deal with these matters.”
Netflix’s business model depends on spending a great deal on content and far less on its Internet traffic delivery. The company warned in a February regulatory filing that its operating results could suffer if ISPs don’t agree to interconnect with their servers. Broadband providers, in turn, have blamed Netflix for routing its traffic inefficiently.
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