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Public Policy

Why is Netflix Strong Arming the Net Neutrality Debate?

@chairmanpowell

June 12, 2014

In the ongoing air wars over net neutrality, personal attack and comedic fodder have sadly obscured an accurate portrayal of the issues now confronting the FCC in the wake of the DC Circuit’s decision in Verizon v. FCC. Instead of following the old adage of “when in danger, when in doubt, run in circles, scream and shout,” perhaps we ought to take a breath and refocus serious attention on the task before the agency.

For starters, let’s acknowledge that there are no “net neutrality” rules at present other than the FCC’s 2010 ‘transparency rule’ that survived court review and that ISPs continue to follow today. In this light, we ought to see that inflammatory attacks claiming that the FCC is about to “wreck” net neutrality are nothing but hyperbolic, hot air. You can’t “wreck” rules that no longer exist.

Second, as parties seek to manufacture a continuing din of discontent, we ought to acknowledge what we are not fighting about. Though it’s seldom reported, it’s worth remembering that the cable industry has long supported an open Internet and, in fact, supported the 2010 Open Internet rules adopted by the FCC. To be fair, some may have questioned the necessity of rules in the absence of real harms, but the industry was willing to operate under that regime since it did not alter our ability or incentives to build and expand robust broadband networks. Additionally, ISPs have stated quite clearly that they don’t see much of a business case for the kind of “fast lane, slow lane” strategy that so many insist is at hand.

Fast forward to today. As the FCC looks to follow the DC Circuit’s invitation to restore net neutrality rules, one might think that the task before us is simple. But alas, nothing in this debate ever is.

Sadly, others Internet players – most notably, Netflix – are now seeking to leverage this proceeding to serve their own particular corporate ends. They do not seek to restore prior rules; they seek to “move the goal posts” and dramatically expand what net neutrality means. They want to protect their profits by ensuring that the disproportionate impact caused by delivering traffic to their customers is spread across all broadband subscribers and not just those who actually use the service. In other words, if there is any additional cost to accommodating Netflix traffic, everyone’s broadband bill should go up rather than increase the price of the Netflix subscription. Why should everyone subsidize fans of House of Cards?  They are not seeking “strong” net neutrality; they are seeking to “strong-arm” net neutrality into satisfying a separate and distinct objective.

In fact, the myriad business arrangements by which thousands of ISPs, content providers, transit providers, and content distribution networks exchange Internet traffic was not part of Commission’s 2010 Open Internet proceeding and should not be now. In some cases, those agreements have been in place for decades and dragging these complex commercial relationships into the net neutrality proceeding would upset a well-functioning marketplace and make restoration of appropriate Open Internet rules even more difficult than it would be otherwise.

Expanding the scope of this proceeding is troubling not only because it threatens progress on a viable replacement regime for the rules that were struck down, but also because the allegations consciously omit Netflix’s own culpability and control over the performance of its service.  Netflix has alleged that ISPs have intentionally degraded interconnection links used by its chosen transit providers and that they have done so for the purpose of forcing Netflix to agree to pay tolls for access to ISP customers. It further suggests that its decision to enter into contracts with Comcast and Verizon were made under duress and that it made this sacrifice because that was the only way to ensure a quality viewing experience for its customers. And until recently chastened to relent, Netflix attempted to convince Verizon customers that poor Netflix performance was solely attributable to congestion in the local access network.

The implication that Netflix has no control over the performance its customers experience is wrong. In fact, recent analysis by Sandvine confirms the exact opposite – that is, the strategic routing choices made by Netflix have a significant effect on the performance a customer receives. By choosing to send large portions of its traffic down routes that were ill-equipped to handle the load (and by choosing not to route through independent, available transit providers) Netflix’s performance on those routes unsurprisingly declined. As network analyst Dan Rayburn recently commented, “Netflix chose to create, and use, paths that they knew were congested, simply because they were cheaper than using paths that were less congested.”

Fixing these performance problems did not require Netflix to do a deal with Verizon or Comcast. Netflix could have spread its traffic over additional third party transit links, rather than trying to send the vast majority of its traffic over Cogent’s network. Or it could have sent some of its traffic through the third party CDNs that had successfully carried its traffic in high quality to ISPs for years. In none of those cases would Netflix have had to pay Comcast, or Verizon – or any residential ISP. That it chose to do so ultimately suggests Netflix got a better deal by directly peering with a residential ISP than with any of the middlemen. But its choice should not obscure the fact that it had (and still has) other competitive options, ones that the overwhelming majority of edge providers use, and have generally used, for years to achieve high quality, with low cost, and without incident.

Allowing the net neutrality conversation to be hijacked into a peering debate is a mistake that will only cloud the Commission’s ability to move forward in the Open Internet proceeding. Netflix’s peering gambit is primarily about improving their own economics and says more about Netflix’s power than about any ISP’s. We should stay focused on the last mile issues that gave rise to the Open Internet rules in the first place, and ensure a clear path forward to reinstate new rules in line with the Court’s direction.

  • timojhen

    Netflix is really wearing out their welcome with the opportunistic obfuscation. Good to see the increasing focus on the truth.

  • Andy Twain

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  • DaveK

    the cable industry has long supported an open Internet and, in fact, supported the 2010 Open Internet rules adopted by the FCC….the industry was willing to operate under that regime since it did not
    alter our ability or incentives to build and expand robust broadband networks.

    You do *remember* that Comcast sued the FCC over blocking Bit Torrent traffic and won, correct? And that Comcast AGREED to the Open Internet rules to bolster their merger argument for NBC Universal? I mean as long as we’re talking about supporting the Open Internet!

    the myriad business arrangements by which thousands of ISPs, content
    providers, transit providers, and content distribution networks exchange
    Internet traffic was not part of Commission’s 2010 Open Internet
    proceeding and should not be now.

    I might agree *IF* these phone and cable companies were NOT allowing interconnect points to saturate causing not only Netflix service to drop, but any other Internet traffic that the phone and cable company customers wanted to reach! Let’s call a spade a spade.

    What’s the harm in allowing information to be examined? If there is NO wrong doing on the part of the phone and cable companies, they have nothing to worry about! Let Netflix call to the high heavens – it would not matter, correct?

    …dragging these complex commercial relationships into the net neutrality
    proceeding would upset a well-functioning marketplace and make
    restoration of appropriate Open Internet rules even more difficult than
    it would be otherwise.

    Sounds like they got caught with their hand in the cookie jar! If their size allows them to influence interconnection traffic, it *should* be examined. That’s the problem with MONOPOLY companies! They hold the cards and what can a content company do by cry foul?

    “Netflix chose to create, and use, paths that they knew were congested,
    simply because they were cheaper than using paths that were less
    congested.”

    Interconnect points increase and decrease as the ISP customers request Internet resources and services. The ONLY way they can degrade is if the ISP fails to upgrade those interconnect points. Netflix has no control over whether Comcast or Verizon upgrades those points, but Comcast and Verizon do have control!

    Fixing these performance problems did not require Netflix to do a deal with Verizon or Comcast.

    And when the Mafia “suggests” that you need “protection” money, you don’t really need it. Until your business burns to the ground. Look at the Netflix chart and watch the Comcast and Verizon traffic DROP LIKE A ROCK!

    In none of those cases would Netflix have had to pay Comcast, or Verizon
    – or any residential ISP. That it chose to do so ultimately suggests
    Netflix got a better deal by directly peering with a residential ISP
    than with any of the middlemen.

    It was the MAFIA suggesting that protection money was needed to keep their TRAFFIC SPEED FROM CONTINUING TO DROP LIKE A ROCK!

    Netflix’s peering gambit is primarily about improving their own
    economics and says more about Netflix’s power than about any ISP’s.

    This is the only way Netflix was able to get attention. Do you *think* they would CHOOSE to pay more money to EACH AND EVERY ISP in America for the sole purpose of reaching each ISP’s customers better? It adds a new [unexpected] expense (for *every* ISP that can EXTORT money from Netflix) that they must now factor into their business cost structuring. They have no more power to influence Comcast then Safeway is able to exert to force you to patronize Safeway rather than Albertsons.

    Comcast on the other hand could raise the rates tomorrow and what choice do you have? How many other ISPs are knocking down your door to provide Internet service to your home?

    Michael Powell is PAID to present the case this way. He has EVERYTHING to gain by skewing the arguments around Net Neutrality!

    The bottom line is that Title II classification is NEEDED to keep your money in your pocket. If
    these phone and cable companies can’t make a buck using the BILLIONS in existing tax
    incentives and tax breaks given the industry, maybe they should just
    exit the business.

    Contact the FCC and submit a comment (https://www.fcc.gov/
    comments – docket #14-28). This is a good suggestion:

    NO PAID PRIORITIZATION. We needed STRONG Net Neutrality rules backed by
    a strong legal position. We MUST reclassify the phone and cable
    providers as the “common carriers” that they are by invoking Title II of
    the telecommunications Act.

    I would also suggest that you
    contact ALL your elected officials and DEMAND the same thing as above.
    Let them know your position.

    • Devin Bowen

      suing the FCC for blocking torrent traffic is in favor of an open internet. Also, agreeing to open internet rules just to bolster their merger, or in other words, increase their profits is STILL SUPPORTING OPEN INTERNET. You just proved the authors point. What Comcast’s highest priority is to make the most money, it’s right in line with supporting the open internet. The only reason I can figure that you posted that maximizing profits is bad even when it disproves your point is that you are anti-capitalist. The internet was created by, pioneered, advanced, and supported by corporations trying to earn money. If anyone doesn’t like the idea of supporting a corporation who’s highest priority is to make money, then stop using the internet.

      Free markets and capitalism are what fuels innovation.

      BTW, I didn’t read past your first two points, fyi.

      • DaveK

        I’m not anti-capitalist, but I am anti-MONOPOLIST!

        And corporations did NOT invent the internet, it was a military program (DARPA) funded by public money (you and I as tax payers).

        Free (level field) markets do fuel capitalism. But these are NOT level fields. How many choices in broadband do you have? I have 2: Comcast and CenturyLink. CenturyLink is 1.5Mbps. Comcast can go as high as around 105 (could be off a little bit on this number). So which would you choose?

        • SocialismSTINKS

          How many do you have when a govt runs it?

          • DaveK

            How is that relevant?

            To answer your question – the EXACT same! Government setting rules for how traffic is treated when accessed over the Internet has NOTHING to do with the number of ISPs in my neighborhood!?!

        • JeromeD

          Why are your choices limited to those two? Government regulation. If I wanted to lay fiber today, I’d need more than the investment; I’d need years of environmental impact studies done for the ground I’d be tearing up. I’d need years of permit work done- state and local, with time-to-respond and review given to each. I’d need a horde of lawyers. I’d need, basically, a business case that doesn’t exist, because there is no way my investment would ever pay off compared to what I could get where I to invest all that money X all that time.

          Your answer to the crushing duopolies created by smothering regulation is…more regulation?

  • Cynthia Avishegnath

    There is this that I don’t understand.

    My isp charges me by the bandwidth.
    $20 = 2 mbs
    up to the scale of $90 for extreme speed, and I am at the extreme speed.

    If they are accepting money from content provider to serve me bandwidth-heavy content, why then are they collecting money from me for receiving the bandwidth-heavy content?

    Isn’t that like eating the cake from both ends? Double dipping.

    I don’t care if there are existing contracts between content and medium providers. Sorry y’all got yourself into the mess. Don’t pull me into it. Things gotta change.

    It used to be that Yahoo gave us only 2mb for email storage. And they hacked their search results with paid ads.

    Then along came Google, starting to give us 1GB, then more and more. Then they gave us https. If Google had not done it, nobody would have changed their game.

    So you guys are just sitting on the trough, sitting on corporate inertia, giving us as bad a deal as competition would allow you to. Just like Yahoo & co. Thanks. I hope Google would put y’all out of business.

    Google is no saint, but at least they are sensible. And btw, I don’t subscribe to netflix streaming. I am a programmer needing to access my company vpn.

    • CharlesC

      That is exactly what the article is stating about Netflix. That Netflix is paying off the ISPs so that people will get angry with the Internet Service Providers and make them seem greedy. They are betting that as a result of this they can influence the expansion of the new rules to make it cheaper for their customers and pushing the cost to all Internet Subscribers. By hijacking the debate it gives them a cheap way to get everyone to pay a bit more instead of making their subscription price increase. Did you read the entire article?

      • Cynthia Avishegnath

        Then the ISPs should stop charging me stratified rates.

        All you people (who probably have interests linked to ISPs) muddying up the scene and complicity by using masquerading words like,

        “Exactly … blah, blah, blah ….”

        There isn’t any exactly on your side of the story to my side of the story. Don’t use the “exactly” word to try to hijack my narrative. There is NOTHING “exactly”.

        Either meter my usage or meter the content provider’s traffic. Metering my usage is a more consistent and equitable resource usage metering.

        Your technology is outdated, you have not bothered to upgrade your cables ever since we started running out of dark cables. And there is only one ISP that is bothering to build optical transmission around the country, now?

        You industry, like I said, is like Yahoo. Because there is no Google offering us GB content and https connections, you believe you could lumber along giving us search results doused with adverts. and a 2mb storage.

        “people like you keep falling for it”

        I do hope so. If you are not aware already, everyone has fallen for it. You guys are doomed.

        • CharlesC

          You do realize that the argument is about Internet Neutrality not Internet Service Provider Neutrality? And that the Internet is not just made up of ISPs?
          I would recommend reading more about the subject.
          Nothing stated in this article mentions anything about reducing the amount you pay your ISP.
          Also, I do not work for or support any ISP. I do pay an ISP to get access. I agree that Comcast provides crappy service for the amount they charge but that is not in the context of this article.

        • CharlesC

          One more thing. What is a masquerading word?

          And thanks to people like you we are all doomed.

          • Cynthia Avishegnath

            *Aliasing* is a term in Signal Engineering where one message masquerades as another message or even obscure the other message simply because the two messages share the same transmission signature or compression/encryption silhouette.

  • Alan Larson

    What “disproportionate impact caused by delivering traffic to their customers”? If I am paying for XX megabits/second, and receiving no more than that, the delivery cost is borne by me. If Comcast wants someone else to pay part of that cost, they should clearly lower my price.
    If netflix is sending data down congested paths instead of arranging adequate connecivity, they deserve to die in the public market.
    The moment my provider chooses to give another customer’s traffic priority over mine, we have a problem.

    • Cynthia Avishegnath

      I paid you extreme fees, you should settle the issues. Of course you won’t until you are bribed to do so.

      • Alan Larson

        Indeed!

    • CharlesC

      You should read about how the internet works. It’s actually pretty interesting. http://en.wikipedia.org/wiki/The_internet
      What you pay for is simply the connection to the internet. Very similar to how you have to pay for the connection to the power grid that supplies you with electricity. If you need to use more power you have to pay for a connection that allows you to receive the additional power. Then you also have to pay the company that operates the power plant that generates the electricity and puts it on the grid for you to pull out and use.
      So you see. What you pay your ISP is merely for the connection to the internet. The delivery cost is not entirely paid by you because the data must be delivered from Netflix to your ISP before it gets to your home. This is where the disproportionate impact comes into play. A lot of data must be streamed on demand across a great deal of distance. To accomplish this and still provide you with good quality of signal, this large amount of data must be transmitted very fast. The only way to do this is through the backbone of the internet which is also transferring other large amounts of data to other endpoints. This backbone is very expensive to maintain and therefore costs Netflix a lot of money to have their data transmitted over it. This is what Netflix pays for and cheaped out on by choosing not to pay more to better service their customers.

      Basically, the argument about net neutrality isn’t about your ISP giving someone else’s traffic priority over yours. It’s about who pays for Netflix and other such companies to deliver data to their customers over the backbone connections. Does everyone pay even if they do not use the service because it’s cheaper for everyone especially Netflix, or does the person using it pay by paying more for their Netflix subscription.

      • Alan Larson

        This data (at least the commonly sent parts of it) doesn’t come a “great deal of distance”, unless you consider a few hundred feet a great distance. Look up content delivery networks – they sit in the exchange points with the major networks and deliver it by local connections. Netflix can(and does) deliver with their own equipment in those exchange points.

        To get the traffic to my ISP, Netflix can buy transit from a provider, who will peer with comcast to deliver the traffic, or they can agree to peer directly with comcast and hand them the traffic directly in the exchange point. The cost to comcast (or my ISP) is the same, either way. This is not a reason for Netflix to pay Comcast any extra fee for delivering my traffic at the rate I have paid for.

        Wikipedia may be nice, but it doesn’t beat actually being there.

  • Cynthia Avishegnath

    Y’all should get together as a bunch and humbly beg Buffett, Eric Schmidt and Bill Gates (and NSA) for a $2 trillion investment to upgrade your switches and upgrade your cables to fiber thro out the country, to overcome any outdated metering issues you have.

    You have no excuse sitting on outdated technology that gives you guys the outdated excuses that you keep pulling out of your pockets.

  • Susan Livingston

    I wish they could write this article in English

  • vaLLarrr .

    What???

  • http://m7computers.com/ spockmonster

    If I watch one show a month, I pay the same amount for cable as a guy who watches 24×7 on 5 TV’s.