Netflix is using obfuscation to not pay their fair share!

As a CEO of a company, I would love to have someone subsidize my business and reduce my costs to deliver products to my customers. Yet for-profit company Netflix, which uses more Internet bandwidth than anyone in the world, wants network providers to connect them up for free. Yes, for free. They are using terms such as “Network Neutrality” to make the large telecom providers seem like bad guys, while creating confusion to hide behind their greed. For Netflix, delivery of content is like a cost of goods sold, but they just don’t want to pay their fair share.

In his in-depth article last week for Forbes – How Netflix Poisoned The Net Neutrality Debate – author Larry Downes traces the origins of today’s fight over network neutrality back to March of this year. He references a blog post by Netflix CEO Reed Hastings that “…urged the FCC to redefine net neutrality, transforming it from a set of last-mile consumer protections to detailed government control of connections at the Internet’s back-end. Rather than pay the transit providers, Netflix wanted to connect directly to the ISPs and do so ‘without charge.’” 

In the blog post – Internet Tolls And The Case For Strong Net Neutrality – Hastings further asserts, “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…Without strong net neutrality, big ISPs can demand potentially escalating fees for the interconnection required to deliver high quality service.” 

The post was in response to a January court decision that reopened the question of whether the open Internet required regulatory intervention. According to Downes, Netflix then “injected itself into the new FCC proceeding, hoping to gain leverage in the stand-off. It’s in that context that Hastings argued the FCC rules should mandate free interconnections and accommodation of unlimited capacity, if not for all content providers, then at least for Netflix.” 

So, let’s get a couple of things straight. Net Neutrality is about not allowing ISPs to prioritize traffic to the end consumer. It has nothing to do with Internet peering. The Netflix argument is not about Net Neutrality at all – that’s merely the bandwagon that Reed Hastings is riding to garner favor for his case. In the bowels of the Internet, which Packet Design does a heck of a job of monitoring and managing, Internet Service Providers have interconnection points. The Netflix issue is about peering between different Internet providers who pass traffic to each other through those points. 

When the volume of traffic is approximately the same in each direction, typically they do not charge each other to accept traffic (called settlement-free peering – for more information, see the blog post “Hot Potatoes and Network Neutrality” by our CTO Cengiz Alaettinoglu). However, when one ISP consistently sends more traffic to another, the latter will charge to transit that traffic. 

In the case of Netflix, they want to transport an inordinate amount of traffic without paying. According to Downes, “At peak viewing times, the company’s streaming movies and television shows make up as much as a third of all Internet traffic in the world.” Netflix wanted to keep their costs low, so they found an operator who could transfer all of their traffic on the cheap. 

The problem occurred when Netflix’s service provider needed to interconnect with the rest of the operators. When these operators looked at how much traffic was going to be passed by the Netflix operator vs. what was being sent back, it was not even close. To solve this problem, the non-Netflix operators said, “You need to pay to pass this traffic through our network.” Netflix refuses to pay, then complains when the delivery of their product is slow.  If they do not pay, why should an ISP pay to carry ingress traffic on their network for free? 

Using Netflix’s rationale, anyone providing Internet content should be able to call up any ISP around the world and demand free Internet bandwidth. It sure would be nice to have someone else pay to create/deliver my product. I think Netflix just needs to stop being greedy and pay their fair share.