You are here
Netflix' Net Neutrality Corporate Welfare Plan (Part 10 of a Series)
Submitted by Scott Cleland on Wed, 2012-05-09 18:45
Apparently Netflix is angling to become Silicon Valley's king of corporate welfare. We learn from a New York Times economics column advocating for an Internet industrial policy that "Netflix is trying to build a coalition of businesses to make the case for… net neutrality." And that the "online video powerhouse Netflix started a political action committee to complement a budding lobbying effort in support of the idea that all content must be allowed to travel through the Internet on equal terms" -- translation: always at no cost to Netflix.
But Netflix isn't in need of public assistance; it is America's video subscription leader with 23 million subscribers. Netflix has $3.3b in annual revenues, $1.2b in gross profits, $800m in cash, a 34% return on equity, and a market valuation multiple over twice the market's. And Netflix flexed its exceptional pricing power last year in raising its prices 60% without losing many subscribers.
Netflix' net neutrality plan is a shameless Washington plea for corporate welfare via Government price regulation of privately-owned broadband networks so… Netflix' uniquely voracious 33% usage of the Internet's traffic peak does not cost Netflix anything! Greedily Netflix is asserting that it somehow has an inalienable "right" to forever gorge on nearly a third of the Internet's peak capacity without any obligation, responsibility or expectation to either responsibly use, or contribute to the cost of operating or investing in, the Internet infrastructure that they use more than any entity.
Yes I said overuse. The Internet was never designed to be a broadcast network as Netflix is using it as. In the Internet's early commercial history, companies like Akamai formed to address this inefficient and wasteful use of the Internet by enabling the caching of high-bandwidth content closer to users so that the Internet backbones would not be clogged with unimaginably repetitive streaming. If all content companies streamed all their content over the Internet like Netflix does, it could clog the Internet roughly a hundred times over.
Central to the Internet's value is that it is efficiency enhancing, but only if tera-bandwdith-whales like Netflix, do not use it hyper-inefficiently. Responsible Internet companies distribute their content responsibly. I am not picking on just Netflix on this issue. I strongly criticized Google-YouTube a few years back for similarly inefficiently overusing Internet capacity. I now applaud Google for reversing its runaway Internet usage via more responsible network management and for investing in extensive caching of its content nearer to its users so that it does not consume a wildly disproportionate share of the Internet's capacity like Netflix does now. Netflix imagines benefits without costs. It does not want to invest in responsible network management on its part, it wants to shift that cost to consumers and everyone else to publicly-subsidize its profitability.
Netflix has little credibility leading the charge for "the public interest" here when their motives are so obviously self-serving and undisclosed, and when the way they manage their own network and distribution is so bandwidth inefficient and wasteful.
Netflix has even less credibility when it criticizes Comcast for offering XBox users unlimited usage on a private Comcast network -- i.e. not subjecting it to its public Internet 250g usage cap. What's wrong with offering a private managed data service? It is expressly allowed in the FCC's Open Internet order.
What kind of warped thinking interprets it to be the public interest to somehow disallow any private data innovation and service/model experimentation on privately-owned-and-managed network bandwidth? Microsoft's XBox replaces the much-maligned standard set-top box, and combined with a privately managed network, offers a completely different consumer experience.
Netflix's view of net neutrality effectively would ban innovation on devices (including set-top boxes and remote controls) and on the network (including bandwidth management and new business models) so that there can only be innovation by apps providers like… Netflix. That is a patently self-serving policy position that ignores consumers' interest and demand, and common sense.
Netflix' CEO has lost any remaining credibility in claiming to The New York Times that "net neutrality has broad consumer and voter support." In the 2010 elections, ninety-five candidates for the U.S. House and Senate signed a public pledge in support of net neutrality -- all lost their elections, every single one of them. Yes 95-0. It makes one wonder about what other false assertions Netflix is making to feather its own nest -- doesn't it?
Previous Netflix posts: