Netflix Fears the Internet Could Become Like Cable TV

Fights between big companies could leave Internet users in the dark, the video site’s lobbyist warns.

A sign is posted in front of the Netflix headquarters on January 22, 2014 in Los Gatos, California. 
National Journal
Brendan Sasso
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Brendan Sasso
June 11, 2014, 1:22 p.m.

When ne­go­ti­ations between big me­dia com­pan­ies and cable TV pro­viders break down, view­ers are of­ten left without ac­cess to their fa­vor­ite chan­nels and TV shows.

A fight between CBS and Time Warner Cable last year blacked out chan­nels for mil­lions of con­sumers. Sub­scribers to small cable pro­viders lost ac­cess to Vi­ac­om chan­nels earli­er this year.

Those black­outs could be a pre­view of the In­ter­net’s fu­ture, Net­flix’s top lob­by­ist warned dur­ing a pan­el dis­cus­sion Wed­nes­day.

Chris­toph­er Liber­telli said fed­er­al reg­u­lat­ors should in­ter­vene or the In­ter­net ser­vice pro­viders could “turn the In­ter­net in­to more of a cable tele­vi­sion sys­tem.”

Just like in the cable TV in­dustry, dis­putes between video web­sites and In­ter­net ser­vice pro­viders could keep cus­tom­ers from watch­ing the shows they want, he warned.

For years, web­sites have hired third parties to de­liv­er data to In­ter­net pro­viders, who carry the con­tent to con­sumers’ homes. In re­cent years, be­cause of the massive amount of data that Net­flix is de­liv­er­ing to its sub­scribers, the com­pany has been by­passing those third parties and con­nect­ing dir­ectly to the pro­viders’ net­works. Those dir­ect con­nec­tions en­sure that Net­flix videos stream as smoothly as pos­sible.

But Com­cast and oth­er pro­viders are de­mand­ing that Net­flix pay for dir­ect ac­cess to their net­works. If Net­flix doesn’t pay up, videos be­come grainy and take longer to load.

“This in­ter­con­nec­tion point has be­come the new choke point, the place for ISPs to tax con­tent com­pan­ies,” Liber­telli ar­gued dur­ing the pan­el dis­cus­sion hos­ted by the As­pen In­sti­tute.

He said Net­flix chose to pay Com­cast earli­er this year for a dir­ect-con­nec­tion deal be­cause the situ­ation had be­come “in­tol­er­able.”

“We paid our way around con­ges­tion,” he ex­plained.

The Fed­er­al Com­mu­nic­a­tions Com­mis­sion’s net-neut­ral­ity rules only cov­er how In­ter­net pro­viders handle traffic once it’s on their net­work. The reg­u­la­tions don’t af­fect how net­works con­nect to each oth­er.

But Liber­telli warned that the FCC shouldn’t just give In­ter­net pro­viders a new place to dis­crim­in­ate. He urged the agency to en­act new reg­u­la­tions or im­pose con­di­tions on the massive mer­gers pending be­fore the agency to en­sure Web com­pan­ies can con­nect to broad­band net­works for free.

Jim Cic­coni, AT&T’s top lob­by­ist, ar­gued that Net­flix has al­ways had to pay to trans­mit its traffic and that there’s noth­ing spe­cial about the dir­ect-con­nec­tion deals.

“Net­flix wants free. I get it,” he said dur­ing the pan­el dis­cus­sion. “Some­body ends up hav­ing to pay for the trans­mis­sion of that traffic.”

Reg­u­la­tions re­quir­ing free con­nec­tions would end up for­cing all In­ter­net users to pay for Net­flix’s traffic, re­gard­less of wheth­er they ac­tu­ally sub­scribe to the ser­vice or not, he said.

In an emailed state­ment fol­low­ing the dis­cus­sion, Sena Fitzmaurice, a Com­cast spokes­wo­man, ar­gued that only Net­flix can de­cide how to de­liv­er its traffic.

“They choose the path the traffic takes to us. They can choose to avoid con­ges­tion or in­flict it,” she said. 

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