Net Neutrality is About Consumer Welfare not Corporate Welfare for Netflix

Published March 22, 2014

Billionaire Netflix CEO Reed Hastings objects to Netflix having to pay anything at all for Netflix’ gorging on 30% of the Internet’s North American bandwidth. In a Netflix corporate blogpost billionaire Reed Hastings rails against the perceived injustice of Netflix paying Internet usage-based pricing like consumers do.

At core, Mr. Hastings now derides traditional consumer-defined net neutrality, which ensures consumers the freedom to access the legal content of their choice – as “weak” net neutrality.

Meanwhile, he is attempting to rebrand his new self-serving, corporate-defined net neutrality, which ensures the largest corporate users of the Internet pay nothing for their largest usage of interconnection bandwidth — as “strong” net neutrality.

Mr. Hastings’ position clearly prioritizes corporate welfare above consumer welfare.

His own words make his upside-down priorities clear:

Strong net neutrality additionally 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 network without charge. [Bold emphasis added.]

Simply, Mr. Hastings’ self-serving position here is that large Internet corporations not only should not have to pay for any usage-based Internet interconnection, they should not have to pay anything at all!

Netflix’ position is that users should fund the full cost of the Internet’s infrastructure, while the largest Internet corporations which profit the most from the Internet are entitled to an official special-interest pass on corporate responsibility.

Most simply, Netflix demands that large Internet corporations be entitled to use and profit from the Internet for free, while consumers and ISPs pay their tab.

Anyone who thinks about it appreciates that the Internet operates over very expensive high-tech infrastructure that constantly needs upgrade to handle exploding usage. Someone has to pay for it, it is not free.

Like any other market, Internet users can buy different types of Internet access based on their different needs, wants and means. Specifically, a consumer can buy the speed and mobility they want and the amount of usage they want to consume. And like any other rational economic market, those that use more, pay more.

Give Mr. Hastings credit where credit is due, he has a lot of gall. His concept of “strong” net neutrality is that the corporation that uses the most Internet bandwidth, his, with a whopping 30%, should pay the least.  

Moreover, under Mr. Hastings “strong” net neutrality vision, corporations may charge consumers for their Internet usage, but may not charge other corporations for their usage. Here Mr. Hastings employs self-serving, pejorative terms like “toll” and “arbitrary tax” to distract people from the fact that what we are really talking about here is simply a price for value received.  

Notice how Mr. Hastings’ priority for “strong” net neutrality effectively abandons the consumer?  

It will be telling to see if any consumer groups support Netflix’s anti-consumer position. And if some do it will be telling how they square that circle with their consumer clients.

In sum, this whole issue is actually very simple. For two decades of exponential growth, the Internet backbone market has flourished spectacularly without government regulation.

Internet backbone interconnection pricing is largely based on volume of exchanged traffic (usage) by ISPs, the largest Internet companies and intermediaries. Consumers, both individuals and businesses, also pay for their Internet based on usage. Why now should Netflix and other big Internet corporations be granted a regulatory special exemption from Internet usage pricing at the expense of consumers and other businesses?

Consumers know the old adage — you get what you pay for. Somehow Netflix imagines it is owed whatever they want — and it does not have to pay anything for it.

Simply, Netflix is putting corporate welfare above consumer welfare.


Netflix Research Series

Part 1:  Level 3 & Net Neutrality – Ignorance Unleashed! [11-30-10]

Part 2:  Level 3-Netflix Expose their Hidden Agenda [12-3-10]

Part 3:  Sinking Level 3 Seeking FCC Internet Regulation Bailout [12-8-10]

Part 4:  Netflix’ Open Internet Entitlement Hubris [2-1-11]

Part 5:  Fact-Checking Netflix’ Net Neutrality WSJ Op-ed [7-8-11]

Part 6:  Netflix’ Glass House Temper Tantrum Over Broadband Usage Fees [7-26-11]

Part 7:  Netflix Crushes its Own Momentum [9-20-11]

Part 8:  Netflix the Unpredictable [10-10-11]

Part 9:  Is Netflix the AOL of Web Streaming? [3-9-12]

Part 10: Netflix’ Net Neutrality Corporate Welfare Plan [5-9-12]

Part 11: 5 BIG Implications from Court Signals on Net Neutrality – A Special Report [9-13-13]

Part 12: Video: Why FCC Title II Reclassification of Broadband is a Legal Non-Starter [9-22-13]

Part 13:  Is Net Neutrality Trying to Mutate into an Economic Entitlement? [1-12-14]

Part 14:  Exposing Netflix’ Extraordinary Net Neutrality Arbitrage [1-24-14]

[First posted at the Precursor Blog.]