Evaluating Credibility in the Net Neutrality Debate

Posted By on Jul 27, 2014 | 2 comments

Recent articles have reported that filings in the FCC’s net neutrality docket by some cable companies and cable industry groups warned that major web content providers, such as Netflix and Google, represent a much greater risk to the open internet than ISPs.

Netflix CEO Reed Hastings dismissed the notion that Netflix has any interest in extracting financial concessions from ISPs.  And popular reaction to the story has been, shall we say, skeptical.

But an objective examination of the history of intentional interference with user access to web services reveals that, historically, web services, themselves, have been the overwhelming source of interference to the open internet, often very openly using that interference in an attempt to gain financial benefit for themselves.

While conspiracy theories and accusations have abounded respecting the intentions and actions of ISPs, as we have explained previously, there has been just a single documented instance of actual malicious interference with a web service by an ISP in the US, when tiny Madison River Communications, serving 40,000 DSL subscribers in North Carolina, briefly blocked Vonage’s VoIP service in 2005.  (That case was quickly resolved by the FCC via a consent decree, before the FCC even had any formal rules at all respecting net neutrality.)

On the other hand, examples of flagrant interference by web service providers have been frequent.  For example, it has now become routine for television broadcasters and networks to block, or to threaten to block, access to their websites by customers of a specific ISP, as a tactic during carriage disputes/negotiations with the television arms of those ISPs.

We’re not talking about cutting off access to services that are delivered only to paying subscribers, because those users are no longer paying.  Rather, we’re talking about taking services that are made freely available to the public, without subscription, and blocking only customers of one ISP, as leverage in a separate business dispute.

Among major networks, Viacom, News Corp (Fox), and CBS have each engaged in such tactics in recent years.

As for Netflix, perhaps Reed Hastings’ dismissal would be more assuring if it weren’t for the fact that Netflix has repeatedly engaged in bad behavior, in pursuit of proprietary financial benefit. For one thing, as we have explained previously, Netflix’s entire business model is predicated on forcing non-Netflix subscribers to very substantially subsidize Netflix service for subscribers.

But directly on point, Netflix has actually, and openly, engaged in the practice of degrading its own services, in the past, in an attempt to pressure ISPs into granting them interconnect concessions to give Netflix great financial benefit.

Though Netflix has mounted a persistent (and frankly, effective) PR campaign to argue that ISPs resisting its interconnect demands are somehow behaving badly, the reality is that what Netflix has demanded is preferred access that its competitors don’t have, and don’t have any opportunity to demand.  Furthermore, while they present those interconnect demands as if they cost nothing for the ISPs to implement, the reality is that there are significant costs that ISPs have to bear under programs such as Netflix’s Open Connect, and Netflix gains great financial benefit from such.

A program such as Open Connect is very specifically a privileged access program, giving Netflix a significant competitive advantage over would-be rivals.  For some, the mere existence of such privileged access is cause for concern, in itself.

But the way Netflix has gone about pursuit of Open Connect agreements has been a direct affront to open internet principles.  In January 2013, Netflix announced that it would start delivering “SuperHD” and 3D versions of some content.  But as part of its effort to pressure ISPs to join its Open Connect program, Netflix blocked customers of ISPs not participating in Open Connect from receiving those best quality versions.  It was not until September of that year that Netflix finally bowed to public pressure and began making its best content available to all of its subscribers, regardless of which ISP they used.

So Netflix has very openly demonstrated its willingness to interfere with access to its own service, in hopes of leveraging financial gain in its interconnect arrangements with ISPs.  They have very openly been willing to sacrifice their own customers’ experience, to achieve such.

This is precisely what net neutrality advocates argue that ISPs might do.  Netflix actually has done it!  Televisions networks actually have done it!

So why would anybody believe Reed Hastings when he proclaims his commitment to an open internet?  And why is the public at large so quick to believe that ISPs represent an imminent threat to the open internet, but so dismissive of major web services, themselves, as a potential threat to such?

It undoubtedly comes down to it being very easy to think bad things of companies that you already dislike, and much harder to think bad things of companies that you like a lot.

At some point, however, those who wish to be serious, rather than just reflexive, in considering open internet/net neutrality concerns and policy, will have to get past their own personal prejudices, and actually evaluate how the facts line up in this debate.