Netflix’s Net-Neutrality Plea Gets Rejected by the FCC

But the agency might still regulate negotiations between websites and Internet providers.

Francis Underwood is returning to screens soon, but U.S. viewers will experience more buffering than most.
National Journal
Brendan Sasso
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Brendan Sasso
April 1, 2014, 7:20 a.m.

The Fed­er­al Com­mu­nic­a­tions Com­mis­sion has no plans to ex­pand its net-neut­ral­ity rules to en­sure that ser­vices like Net­flix can con­nect to In­ter­net pro­viders’ net­works for free.

But the agency is eye­ing oth­er av­en­ues to reg­u­late spe­cial deals between web­sites and In­ter­net pro­viders — an area of con­cern for con­sumer groups after Net­flix paid Com­cast for bet­ter ac­cess to its cus­tom­ers.

At a press con­fer­ence Monday, FCC Chair­man Tom Wheel­er ar­gued that the gov­ern­ment has a crit­ic­al role to play in over­see­ing how net­works con­nect to each oth­er. But it is “not a net-neut­ral­ity is­sue,” he said.

Asked to cla­ri­fy the chair­man’s com­ment, an FCC spokes­man said: “Peer­ing and in­ter­con­nec­tion are not un­der con­sid­er­a­tion in the Open In­ter­net pro­ceed­ing, but we are mon­it­or­ing the is­sues in­volved to see if any ac­tion is needed in any oth­er con­text.”

The state­ments ap­pear to re­ject the re­cent plea from Net­flix CEO Reed Hast­ings to ex­pand the FCC’s Open In­ter­net Or­der (bet­ter known as the net-neut­ral­ity rules) to cov­er in­ter­con­nec­tion deals.

But the FCC could de­cide to en­act sep­ar­ate reg­u­la­tions on the is­sue or force Com­cast to ac­cept new rules in or­der to re­ceive per­mis­sion to buy Time Warner Cable.

Web com­pan­ies have ne­go­ti­ated con­nec­tion agree­ments since the cre­ation of the In­ter­net. Most web­sites con­nect to in­ter­me­di­ar­ies, who carry the traffic to In­ter­net ser­vice pro­viders, who de­liv­er the con­tent to people’s homes. But it was an ar­cane is­sue that at­trac­ted little pub­lic at­ten­tion un­til Feb­ru­ary, when Net­flix agreed to pay Com­cast to con­nect dir­ectly to its net­work.

The agree­ment helped to en­sure that Com­cast sub­scribers can stream Net­flix videos smoothly, with less buf­fer­ing time and few­er in­ter­rup­tions. But it was the first time that Net­flix had ever had to pay an In­ter­net ser­vice pro­vider for a dir­ect con­nec­tion deal.

In a blog post in March, Net­flix’s chief ex­ec­ut­ive sug­ges­ted that Com­cast had strong-armed him in­to pay­ing an “ar­bit­rary tax.”

“If this kind of lever­age is ef­fect­ive against Net­flix, which is pretty large, ima­gine the plight of smal­ler ser­vices today and in the fu­ture,” Hast­ings said.

He warned that the deal fore­shad­ows a fu­ture of high-stakes ne­go­ti­ations between web­sites and In­ter­net pro­viders that will res­ult in es­cal­at­ing costs for con­sumers. When the ne­go­ti­ations break down, con­sumers will lose ac­cess to pop­u­lar sites, he claimed.

“Some big [In­ter­net ser­vice pro­viders] are ex­tract­ing a toll be­cause they can — they ef­fect­ively con­trol ac­cess to mil­lions of con­sumers and are will­ing to sac­ri­fice the in­terests of their own cus­tom­ers to press Net­flix and oth­ers to pay,” he wrote.

Hast­ings urged the fed­er­al gov­ern­ment to en­act “strong net-neut­ral­ity” rules that bar In­ter­net pro­viders from char­ging a toll for dir­ect ac­cess to their net­works.

In an in­ter­view on C-SPAN over the week­end, Dav­id Co­hen, Com­cast’s ex­ec­ut­ive vice pres­id­ent, said Hast­ing’s ar­gu­ments are “es­sen­tially hog­wash.” He claimed Net­flix was the one that pushed for the deal and noted that the video site alone ac­counts for about 30 per­cent of all In­ter­net traffic.

Co­hen said he ex­pects the FCC to scru­tin­ize paid con­nec­tion deals, but that this is “not an area where gov­ern­ment in­ter­ven­tion is use­ful or ne­ces­sary.”

The FCC’s ori­gin­al net-neut­ral­ity rules, en­acted in 2010, re­quired In­ter­net ser­vice pro­viders to treat all In­ter­net traffic equally. A com­pany like Com­cast could not slow down or block a web­site. But the rules did not af­fect how In­ter­net net­works con­nect to each oth­er.

By agree­ing to give Net­flix dir­ect ac­cess to its net­work, Com­cast helped to en­sure high­er qual­ity video ser­vice, but it did not tech­nic­ally give pref­er­en­tial treat­ment to Net­flix traffic as it flowed in­to sub­scribers’ homes.

The FCC is re­work­ing its net-neut­ral­ity rules be­cause a fed­er­al court struck down the old ver­sion earli­er this year.

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