Netflix Kicks Off War of Words With ISPs Over Net Neutrality

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Netflix (NASDAQ:NFLX) CEO Reed Hastings strongly criticized major ISPs like AT&T (NYSE:T), Comcast (NASDAQ:CMCSA), and Verizon (NYSE:VZ) over their alleged anti-net neutrality behavior in a recent post on the video streaming company’s blog. Hastings’s criticisms centered on the interconnection fees that Netflix is forced to pay some ISPs in order to ensure that its customers are able to get a quality video-streaming experience.

“The essence of net neutrality is that ISPs such as AT&T and Comcast don’t restrict, influence or otherwise meddle with the choices consumers make,” wrote Hastings. “The traditional form of net neutrality which was recently overturned by a Verizon lawsuit is important, but insufficient. This weak net neutrality isn’t enough to protect an open, competitive Internet; a stronger form of net neutrality is required.”

As noted by The Verge, the “Verizon lawsuit” that Hastings referred to resulted in a federal appeals court ruling that struck down key segments of the FCC’s Open Internet rules. However, Hastings wants an even stronger form of net neutrality than what was previously covered by the FCC’s rules.

“Strong net neutrality additionally prevents ISPs from charging a toll for interconnection to services like Netflix, YouTube, or Skype, or intermediaries such as Cogent (NASDAQ:CCOI), Akamai (NASDAQ:AKAM) or Level 3 (NYSE:LVLT), to deliver the services and data requested by ISP residential subscribers,” noted Hastings. “Instead, they must provide sufficient access to their network without charge.”

According to Hastings, as long as the industry is lacking that level of net neutrality, services like Netflix will remain vulnerable to a type of extortion from the ISPs. “Without strong net neutrality, big ISPs can demand potentially escalating fees for the interconnection required to deliver high quality service,” Hastings pointed out. “The big ISPs can make these demands — driving up costs and prices for everyone else — because of their market position.”

Although Hastings chastised the ISPs for “extracting a toll” from Netflix, the CEO noted that “in the near term we will in cases pay the toll to the powerful ISPs to protect our consumer experience.” However, he warned that a lack of strong net neutrality could eventually lead to “the kind of brinkmanship over blackouts that plague the cable industry and harms consumers.”

It wasn’t long before several ISPs responded to the allegations raised in Hastings’s blog post. “[T]here has been no company that has had a stronger commitment to the openness of the internet than Comcast,” wrote Comcast executive VP David Cohen in an emailed statement given to The Verge. “[P]roviders like Netflix have always paid for their interconnection to the internet.”

AT&T senior executive vice president of legislative affairs James Cicconi also took exception to Hastings’s perspective on net neutrality. “As we all know, there is no free lunch, and there’s also no cost-free delivery of streaming movies,” wrote Cicconi in a post on AT&T’s Public Policy Blog. “Someone has to pay that cost. Mr. Hastings’ arrogant proposition is that everyone else should pay but Netflix. That may be a nice deal if he can get it. But it’s not how the Internet, or telecommunication for that matter, has ever worked.”

Video streaming services such as the one offered by Netflix have become increasingly popular over the past several years. According to the company’s latest earnings report, Netflix finished 2013 with 44 million subscribers.  Hastings has yet to respond to Comcast’s or AT&T’s comments.

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