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Reed Hastings just as irritated with Comcast as you are

Hastings blasts Comcast and other ISPs over strong-arming Netflix into paying for decent service

Financial trends and news by Faith Merino
March 21, 2014 | Comments
Short URL: http://vator.tv/n/35ce

Netflix CEO Reed Hastings is just as irritated over Netflix’s pay out to Comcast to get better streaming quality as the rest of us are. Last month, Netflix struck a deal with Comcast in which it agreed to pay for direct access to Comcast subscribers so as to improve their rapidly degrading user experience. The deal was not an overt violation of net neutrality since Netflix isn’t paying for priority, but rather for an alternate route to customers. But Hastings now disagrees with that notion and is calling for stronger net neutrality to protect other companies and fledgling startups from being more or less extorted by Internet service providers.

“Some big ISPs 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,” wrote Hastings in a blog post.

Netflix previously noted that since October, traffic speed and performance for Comcast users had declined 27%, now delivering 1.5 megabytes per second versus the 2.07 it was delivering in October.

Considering the fact that Comcast is the number one cable and Internet provider, that doesn’t bode well for Netflix. Netflix streaming traffic speeds under Verizon and AT&T have also declined considerably over the last few months.

Meanwhile, cable/Internet providers like Time Warner Cable and Charter have remained stable at 2.01 and 2.16 megabytes per second, respectively. That’s likely because those companies have upgraded their incoming ports. So while they’re going ahead and doing what they need to do to be effective, competitive cable/Internet providers by upgrading their ports at their own cost, Comcast has held out and is now being paid extra to offer the same quality service. 
Comcast and others have pointed out that Netflix is a notorious bandwidth eater, accounting for 30% peak residential Internet traffic, so they simply want Netflix to share in the costs. But as Hastings points out, those Internet service providers aren’t also calling for Netflix to share in the revenue generated by those users.

“Some ISPs say that Netflix is unilaterally ‘dumping as much volume’ (Verizon CFO) as it wants onto their networks,” Hastings added. “Netflix isn't ‘dumping’ data; it's satisfying requests made by ISP customers who pay a lot of money for high speed Internet. Netflix doesn't send data unless members request a movie or TV show.”

Now the question remains, if Comcast was able to hold out on upgrading its incoming ports to strong-arm Netflix into paying for better service, what’s to stop Time Warner, Charter, and all the other cable/Internet providers from doing so? Will Netflix now have to pay everyone to deliver its content to consumers? If it does, those costs will translate to higher subscription fees for Netflix users.

But Comcast’s defense can also be applied to other websites and content providers. What happens when it decides Amazon is using too much bandwidth, or YouTube, or Facebook? (True story: yesterday, a podcast was taking too long to load on my iPhone and I legitimately started freaking out that Verizon is now trying to strong-arm NPR into paying higher fees for a proper connection.)

“Without strong net neutrality, big ISPs can demand potentially escalating fees for the interconnection required to deliver high quality service. The big ISPs can make these demands -- driving up costs and prices for everyone else -- because of their market position,” wrote Hastings.

 


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