Netflix Fears ‘Internet Tolls’

The company wants to expand federal rules on Internet speeds.

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
March 20, 2014, 4:43 p.m.

Net­flix is call­ing for new fed­er­al reg­u­la­tions to en­sure it doesn’t have to pay ex­tra fees to de­liv­er high-qual­ity video streams to its cus­tom­ers.

In a blog post Thursday, Net­flix CEO Reed Hast­ings warned that without gov­ern­ment in­ter­ven­tion, ne­go­ti­ations between Web ser­vices and In­ter­net pro­viders over con­nec­tion deals could res­ult in the kinds of black­outs that already plague cable tele­vi­sion.

Last month, Net­flix agreed to pay for dir­ect ac­cess to Com­cast’s net­work. The agree­ment en­sured smooth stream­ing for Com­cast sub­scribers who watch Net­flix, but it was the first time the Web video com­pany had ever had to pay for such a dir­ect con­nec­tion deal. Hast­ings called the fee that Com­cast de­man­ded 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 wrote in the blog post.

The Net­flix chief ex­ec­ut­ive urged the Fed­er­al Com­mu­nic­a­tions Com­mis­sion to bar In­ter­net pro­viders from “char­ging a toll” for in­ter­con­nec­tion deals.

The FCC en­acted net neut­ral­ity rules in 2010 that re­quire In­ter­net pro­viders to treat all In­ter­net traffic equally, but the rules nev­er covered in­ter­con­nec­tion deals like the one between Net­flix and Com­cast.

The FCC is cur­rently try­ing to re­work its net neut­ral­ity rules after a fed­er­al court sided with Ve­r­i­zon in Janu­ary and tossed out the old rules.

Hast­ings ar­gued that the FCC should ex­pand the new rules to en­sure that Web ser­vices have free ac­cess to In­ter­net pro­viders’ net­works.

“The es­sence of net neut­ral­ity is that [In­ter­net ser­vice pro­viders] such as AT&T and Com­cast don’t re­strict, in­flu­ence or oth­er­wise meddle with the choices con­sumers make,” he said. “The tra­di­tion­al form of net neut­ral­ity which was re­cently over­turned by a Ve­r­i­zon law­suit is im­port­ant, but in­suf­fi­cient.”

In a state­ment, Com­cast claimed it is a strong sup­port­er of net neut­ral­ity but that the rules were nev­er in­ten­ded to deal with In­ter­net con­nec­tion deals.

“Pro­viders like Net­flix have al­ways paid for their in­ter­con­nec­tion to the In­ter­net and have al­ways had ample op­tions to en­sure that their cus­tom­ers re­ceive an op­tim­al per­form­ance through all ISPs at a fair price,” Dav­id L. Co­hen, Com­cast’s ex­ec­ut­ive vice pres­id­ent, said in a state­ment.

“We are happy that Com­cast and Net­flix were able to reach an am­ic­able, mar­ket-based solu­tion to our in­ter­con­nec­tion is­sues and be­lieve that our agree­ment demon­strates the ef­fect­ive­ness of the mar­ket as a mech­an­ism to deal with these mat­ters.

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