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Exposing Netflix’ Extraordinary Net Neutrality Arbitrage

Netflix’ defensive reaction to the Appeals Court Verizon v. FCC decision in its recent shareholder letter speaks volumes about Netflix’s unique and extraordinary net neutrality regulatory arbitrage. It also begs much more scrutiny.

This analysis exposes: how deceptive Netflix has been to its investors about its regulatory risk; how critical Netflix’ misrepresentation of net neutrality to investors has been to its entire economic model; and how relatively wasteful and irresponsible Netflix is in its utilization of the Internet’s bandwidth.

Title II Reclassification Would Violate the President’s Executive Order on “Improving Regulation”

Yet another major obstacle to net neutrality activists’ call for the FCC to reclassify broadband as a common-carrier service is the President’s 2011 Executive Order on “Improving Regulation.”

By way of background, just weeks after the FCC passed its Open Internet Order (3-2) the President issued Executive Order 13563Improving Regulation and Regulatory Review.”

Why Professor Crawford Has Title II Reclassification All Wrong

Recently the leading public voice of Title II reclassification of broadband, Harvard Law Professor Susan Crawford, assertedAll the FCC has to do is change their mind and say, ‘We got it wrong.’ [The FCC] has ample political congressional authority to do that, this is just a political battle. The FCC is concerned that if it acts to carry out this administrative relabeling, it will lose half its budget and half its staff.

The FCC did not get it wrong. Professor Crawford and supporters of reclassification have it all wrong.  

There are three key problems with Professor Crawford’s reclassification position:

Hear Cleland/Crawford Debate Common Carrier Regulation on WNYC Radio – 13 min

For those who want to hear some of the best arguments and rebuttals for/against Title II reclassification of broadband, please listen to the 13 minute back-and-forth between Professor Susan Crawford and I today.

  • Harvard Law Professor Crawford is the leading proponent for common carrier regulation of broadband.
  • Click here for the audio stream.

It’s a good precursor of the debate ahead. 

  • It is also part 8 of my Title II Reclassification Research Series

Title II Reclassification Series

NetCompetition Statement on Verizon v. FCC Court Decision

FOR IMMEDIATE RELEASE

January 14, 2014

Contact:  Scott Cleland 703-217-2407

Court Upholds FCC’s “General Authority to Regulate” Broadband in Verizon v. FCC, But Denies FCC Authority to Impose Common-Carrier-like Regulation of Broadband.  This win-win, Could Settle into a de Facto Net Neutrality Peace, if Parties Don’t Appeal

WASHINGTON D.C. – The following quotes addressing the D.C. Circuit Court of Appeals, Verizon v. FCC decision may be attributed to Scott Cleland, Chairman of NetCompetition:

Is Net Neutrality Trying to Mutate into an Economic Entitlement?

Net neutrality activist opposition to AT&T’s new Sponsored Data offering exposes that the purpose of “net neutrality/open Internet” is not just about protecting consumers and free speech, or preventing anti-competitive behavior.

Those calling for an FCC investigation of AT&T’s Sponsored Data are trying to mutate the “net neutrality/open Internet” debate to also be about whether or not there should be permanent economic entitlements, i.e. downstream “zero-price” subsidies, for edge websites and applications – to “subsidize creativity” and start-up innovation via an explicit FCC ban on network termination charges.

Translation:  all websites and applications should be entitled, by “open Internet” network design, to no cost Internet distribution/access to consumers forever, regardless of the costs that their services cause everyone else to pay for.

3 min video: Why We Need a Modern Communications Law

To learn why America needs to modernize its obsolete communications laws, please take three minutes to view this video where I explain why -- here.  

Many thanks to Dan Berninger, Founder of the Voice Communications Exchange, for producing this video "VCXC Examines the Future of Communications."  

Nattering Net Neutrality Nonsense over AT&T’s Sponsored Data Offering – Part 23 Broadband Pricing Freedom Series

Net neutrality activists’ criticism of AT&T’s new freebie for consumers called Sponsored Data is nonsensical.

AT&T’s pricing innovation creates a new freebie for consumers and a new freedom for web providers of Internet content, apps and devices that is fully in keeping with any reasonable notion of a free and open Internet.

AT&T’s Sponsored Data offering is no different from other business freebies offered to consumers to market and competitively differentiate their businesses like: Amazon’s free shipping and free Kindle wireless service; Apple’s free messaging and video conferencing; Google’s free Search, Fiber, Maps, Mobile Operating System, and video conferencing offerings; or Yahoo’s free email. A full list of all free and open Internet consumer freebies would be endless.

AT&T’s Sponsored Data innovation is no different from sponsored ads, website sponsors, content sponsors or any other kind of Internet sponsor.

It is nonsensical for net neutrality activists to not be open to yet another free web service. On what reasonable basis is a consumer freebie from AT&T different than a consumer freebie offered by any other competitor in the Internet ecosystem?

U.S. Wireless Economics Beat EU’s Wireless Uneconomics – Part 22 Broadband Pricing Freedom Series

A new European study from Britain’s Office of Communications tries to argue that the EU’s wireless regulation approach is better than America’s. The New York Times’ clever headline on the report sees right through it: “Europeans pay less for mobile use, but at a cost."

In Europe, regulators regularly lower prices and roaming rates for political purposes, ignoring the market economics or economic sustainability of their regulatory approach. The EU’s politics-of-the-moment interest in lower prices, based more on operating costs than total costs that fund long-term investments in infrastructure, ultimately harms consumer value.   

Perspective on the FCC’s Special Access Delay of its IP Transition – Part 7 Special Access Series

FCC staff just muffed an easy opportunity to advance the IP transition on the FCC’s timetable in the National Broadband Plan.

Apparently FCC staff missed the big picture here.

1. On November 25th, AT&T proposed a baby step forward in the IP Transition.

AT&T did not propose any change in special access rates. AT&T simply proposed that its special access contract term-lengths, synch up with the FCC’s own goals for when the IP transition should be complete.

Instead of promoting investment certainty -- by respecting its own IP transition timetable that the private sector has come to rely on for infrastructure investment planning -- FCC staff announced an unnecessary five-month investigative delay.  

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Q&A One Pager Debunking Net Neutrality Myths