Netflix must have been anticipating this year’s World Cup, preparing for it like some soccer athletes by practicing a “dive” or “flop”; feigning some injury in order to get a free kick. The flop I’m referring to is taking opposite positions on the issue of net neutrality while seeking a free kick in the form of free interconnection between its networks and the networks of broadband providers.
Netflix has been sitting in the middle of the net neutrality debate, having on one hand entered an agreement with Comcast that ensures higher quality streaming of its videos to its subscribers while on the other hand arguing that the brand of net neutrality promoted by the Federal Communications Commission is a weak form and that strong net neutrality, where interconnection fees are not assessed by broadband providers on content providers, is a better approach. When it comes to Netflix’s “connections” with its end-users, strong net neutrality doesn’t appear to be the bedrock of its consumer relationship.
So when did Netflix start taking dives? Back in 2004, before Netflix entered the big leagues of distributing video via streaming and distribution of video was done by shipping DVDs through the mail, Netflix didn’t show much appreciation for the strong net neutrality requirement of transparency. The video distribution company was called out for not properly defining what it meant by unlimited DVD rentals for a monthly flat fee. A class action suit alleging that Netflix in September 2004 said that the company falsely and misleadingly promised unlimited DVD delivery via a flat monthly fee and that delivery would be via one-day delivery.
The company eventually settled and paid hefty legal fees of approximately $2.5 million as a result.
Netflix also had to resort to a little discrimination when, back around 2006, it throttled the pace at which it accepted the return of DVDs from its customers. Return DVDs too quickly and you got penalized with a charge. If you were a heavy renter of DVDs, instead of a discount for renting at a larger volume you instead would have found your shipments delayed. So depending on a consumer’s rental patterns, specifically how many videos and how often a consumer decided to rent, Netflix, an edge service provider, was determining how often a consumer could access content.
Netflix, along with its business model, has flopped over the past decade, prepared now to redeem itself by arguing for a stronger form of net neutrality that, by avoiding interconnection fees, would allow an expansion of its bottom line. Nothing wrong with increasing profits, but at least Netflix and its fellow large content providers should take a note from their own playbook and be a bit more transparent as to why they really support net neutrality and, based on past behavior, what we should expect from them in the future.