Netflix Picks a Fight With Cable

Bolstered by a strong earnings report, Netflix is confident it can take on Internet service providers.

A sign is posted in front of the Netflix headquarters on January 22, 2014 in Los Gatos, California. Netflix will report fourth quarter earnings today after the closing bell.
National Journal
Brendan Sasso and Laura Ryan
Add to Briefcase
Brendan Sasso and Laura Ryan
Jan. 23, 2014, 4:52 a.m.

When a court rul­ing struck down down fed­er­al net-neut­ral­ity reg­u­la­tions, it was widely seen as hor­rible news for Net­flix, the type of high-band­width web­site that ser­vice pro­viders such as Com­cast or Ve­r­i­zon would likely tar­get for mil­lions of dol­lars worth of fees.

In­stead, it’s Net­flix that is fir­ing the first shot.

CEO Reed Hast­ings on Wed­nes­day warned pro­viders that it will rally its cus­tom­ers against them should they threaten to charge the site more or slow down its traffic.

Un­til the rul­ing last week by the D.C. Cir­cuit Court, In­ter­net pro­viders were leg­ally re­quired to treat all traffic equally, neither pri­or­it­iz­ing traffic from one web­site or an­oth­er nor char­ging web­sites ex­tra for us­ing lots of band­width. But now that those “Open In­ter­net” rules have been thrown out, many saw Net­flix as a likely can­did­ate for new charges. Not only is the stream­ing web­site a ma­jor hog of In­ter­net road space, its con­tent also com­petes dir­ectly with In­ter­net ser­vice pro­viders’ cable of­fer­ings.

But Net­flix says it is ready.

“Were this dra­coni­an scen­ario to un­fold with some [In­ter­net ser­vice pro­viders], we would vig­or­ously protest and en­cour­age our mem­bers to de­mand the open In­ter­net they are pay­ing their ISP to de­liv­er,” Hast­ings wrote in the note on Wed­nes­day, which ac­com­pan­ied the com­pany’s quarterly earn­ings re­port.

With a pres­ence in one in four U.S. house­holds, Net­flix is a con­sid­er­able force, but Hast­ings says he doesn’t ex­pect to have to re­sort to a pub­lic battle with the In­ter­net pro­viders.

“ISPs are gen­er­ally aware of the broad pub­lic sup­port for net neut­ral­ity and don’t want to gal­van­ize gov­ern­ment ac­tion,” he wrote.

Broad­band In­ter­net is an ex­tremely prof­it­able busi­ness, Hast­ings noted, and the pro­viders want to en­sure their cus­tom­ers have ac­cess to high-qual­ity video sites. He also said he hopes the pro­viders will ad­here to a “mean­ing­ful vol­un­tary code of con­duct,” but warned that if they start de­grad­ing In­ter­net traffic, Net­flix will lobby for tough­er reg­u­la­tion.

What We're Following See More »
House to Vote on Iran Sanctions Renewal in Lame Duck
2 minutes ago

Republican House leaders are planning on taking up a vote to renew the Iran Sanctions Act as soon as the lame-duck session begins in mid-November. The law, which expires on Dec. 31, permits a host of sanctions against Iran's industries, defense, and government. The renewal will likely pass the House, but its status is unclear once it reaches the Senate, and a spokesman from the White House refused to say whether President Obama would sign it into law.

Trump Stops Holding Fundraisers to Benefit GOP
7 minutes ago

Just two weeks from Nov. 8, Donald Trump's campaign is not scheduling anymore high-dollar fundraisers, the type which usually benefit the Republican Party as a whole. The move comes as a surprise and could be a big blow to the GOP's turnout operations. Many down-ballot candidates are relying on the party apparatus to turn out voters in their districts and/or states, something that could be compromised. The last formal fundraiser occurred on Wednesday, Oct. 19.

Republican Polling Shows Close Race
Roundup: National Polling Remains Inconsistent
16 hours ago

The national polls, once again, tell very different stories: Clinton leads by just one point in the IBD, Rasmussen, and LA Times tracking polls, while she shows a commanding 12 point lead in the ABC news poll and a smaller but sizable five point lead in the CNN poll. The Republican Remington Research Group released a slew of polls showing Trump up in Ohio, Nevada, and North Carolina, a tie in Florida, and Clinton leads in Pennsylvania, Wisconsin, and Virginia. However, an independent Siena poll shows Clinton up 7 in North Carolina, while a Monmouth poll shows Trump up one in Arizona

Colin Powell to Vote for Clinton
18 hours ago
Clinton Reaching Out to GOP Senators
23 hours ago

If you need a marker for how confident Hillary Clinton is at this point of the race, here's one: CNN's Jeff Zeleny reports "she's been talking to Republican senators, old allies and new, saying that she is willing to work with them and govern."


Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.