By Gautham Nagesh
Broadband companies should be required to connect their networks
to major content providers such as Netflix for free, Netflix Inc.
CEO Reed Hastings said Thursday.
In a blog post published on the company's website, Mr. Hastings
called for rules to that ensure big broadband providers like
Comcast Corp. can't keep charging companies such as Netflix a fee
to connect directly to their networks--a practice known as paid
interconnection, or peering.
In the post, Mr. Hastings publicly acknowledged that Netflix
recently struck a paid peering deal with Comcast, which he said had
improved service for Netflix subscribers with Comcast internet
service. While both sides have characterized the payments as
relatively small, it is the principle of paid peering that concerns
Netflix in the long term. Mr. Hastings said such deals could open
the door for Internet service providers (ISPs) to charge Netflix
and other content providers escalating fees to reach consumers.
"If this kind of leverage is effective against Netflix, which is
pretty large, imagine the plight of smaller services today and in
the future," Mr. Hastings said.
Mr. Hastings framed peering as crucial to the principle of net
neutrality, which states that Internet service providers can't
discriminate between two similar content providers. Earlier this
year Verizon Communications Inc., convinced the U.S. Court of
Appeals for the D.C. Circuit to throw out the Federal
Communications Commission's net neutrality rules, but FCC Chairman
Tom Wheeler has signaled he intends to issue new rules in the
coming months.
"Netflix believes strong net neutrality is critical, but in the
near term we will in cases pay the toll to the powerful ISPs to
protect our consumer experience," Mr. Hastings said. "Without
strong net neutrality, big ISPs can demand potentially escalating
fees for the interconnection required to deliver high quality
service."
Netflix has urged the FCC to ensure that its new net neutrality
rules cover peering. In addition, Netflix could push for the FCC to
mandate free peering as a condition for approval of Comcast's $45
billion acquisition of Time Warner Cable Inc. That deal would
expand Comcast's footprint as the nation's leading broadband
provider.
A Netflix spokesman said no-fee interconnection is essential for
an open, competitive Internet.
"We hope the big ISPs embrace strong net neutrality on their
own," he said. "To the extent companies don't do the right thing,
government will have to consider stepping up its obligations to
protect consumers."
In a statement, Comcast Executive Vice President David Cohen
said "the open Internet rules never were designed to deal with
peering and Internet interconnection" and noted that "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."
Mr. Cohen said Comcast is happy that it was able to reach an
"amicable, market-based" interconnection agreement with Netflix and
believes the deal "demonstrates the effectiveness of the market as
a mechanism to deal with these matters."
Netflix's business model depends on spending a great deal on
content and far less on its Internet traffic delivery. The company
warned in a February regulatory filing that its operating results
could suffer if ISPs don't agree to interconnect with their
servers. Broadband providers, in turn, have blamed Netflix for
routing its traffic inefficiently.
Shalini Ramachandran and Drew FitzGerald contributed to this
article.
Write to Gautham Nagesh at gautham.nagesh@wsj.com
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