For years we've discussed how incumbent phone company executives live in a bubble, believing that they magically deserve a cut of any traffic that so much as touches their network. It's the kind of logic that began the network neutrality debate back in 2005, when then AT&T CEO Ed Whitacre declared he "wasn't going to let Google ride his pipes for free." This idea that content companies get a "free ride" has been a cornerstone of telco think ever since, even if it's not supported by the facts
. That hasn't stopped this argument from being made time
and time again
by broadband industry lobbyists, assorted hired mouthpieces
Investors are too impatient to wait for the long-term returns of even modest network upgrades, regardless of whether the investment is absolutely necessary to be a competitive broadband provider. Large incumbent carriers make very healthy profits under the flat-rate pricing model, but instead of upgrading networks to stay competitive, the nature of the corporation has them dumping the lion's share of those earnings into investor pockets, lobbyists, campaign contributions and exorbitant executive compensation.
Trying to meet the insatiable demand for quarter-over-quarter improvements while skimping on upgrades and customer service, execs are then constantly looking for ways of offloading upgrade costs to someone other than themselves. Usually that's you, in the form of additional fees (like a fee just for paying your bill
and now costly per byte overages). However, a long-time pipe dream has been to also offload upgrade costs to content companies (also, by proxy, you) by imposing new gateway tolls and vilifying actual network use. It makes absolutely no sense, but that certainly hasn't stopped the industry from trying.
The latest lobbyist effort to try and push this absurd argument comes courtesy of John Sununu and former Rep. Harold Ford Jr., who are getting paid to be mouthpieces for "Broadband For America," an industry lobbying group we profiled back when it was created
. You'll recall that Netflix has become more vocal about the threat metered billing has on content innovation, recently (and correctly) noting that most of these low cap, high per-byte overage efforts aren't tied to real world costs, and are simply efforts to raise rates on already expensive broadband service while protecting TV revenues
Now commanding 64% of the digital video market and poised to threaten traditional TV, Netflix has now become public enemy number one for cable and phone industry lobbyists. Responding to a recent editorial by Netflix General Counsel David Hyman, both Sununu and Ford have penned their own counter-editorial
, which once again trots out the age-old argument that Netflix is getting a "free ride," while somehow arguing that metered billing is a "fairer" way to bill customers. Using the same talking points telecom lobbyists have used all year about how consumers are "subsidizing" Netflix, the two retread some very familiar, and very debunked ground:
The reality is that Netflix and similar services want a free ride on the networks built with more than $250 billion in design, engineering, manufacturing, construction and maintenance -- a system that now provides broadband services to 95 percent of American households. Broadband networks are delivering more than just the latest sitcom episodes and hottest movies. They facilitate telemedicine, education, job training, telecommuting and many other functions. It hardly seems fair to make users of these services pay more in order to subsidize Netflix's costs of delivering their videos online.
This call for a fairer pricing model and a more realistic long-term investment strategy has bipartisan support. In 2010, the FCC said government policy should not discourage "broadband providers from asking subscribers who use the network less to pay less, and subscribers who use the network more to pay more."
We (and many others) have debunked all of these arguments countless times before, and nothing changes, since the hired guns pushing this argument can't be reasoned with, and simply hope that repeating the same points will magically make them true. Netflix isn't getting a free ride, since they pay plenty for their own bandwidth. Customers who are choosing to use Netflix already pay more for bandwidth in the United States than most developed countries
. Flat rate pricing is perfectly profitable for carriers providing plenty of funding for upgrades; many large ISPs are simply choosing to pocket that cash.
As we've stated countless times, these new low cap, high per byte overage pricing models aren't "pay for what you use," they're simply flat rate pricing with steep and costly overages tacked on in order to jack up prices for everyone. These plans are about artificially constricting the pipe and jacking up costs to retain power and protect revenues in an evolving video marketplace
. Neither "fairness" or fiscal necessity have absolutely anything to do with it. The mindless rhetoric driving this push -- especially that content companies get a "free ride" -- is some of the most obnoxious and disingenuous dreck to ever bubble up from beltway crowd.
Meanwhile Mike Masnick over at Techdirt
posits that if Sununu and Harold Ford Jr. really think Netflix gets a free ride, surely they would be willing to pay Netflix's bandwidth bill for a month?