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Netflix: Maybe ISPs Should Pay Some of Our Content Costs

Ever since former AT&T CEO Ed Whitacre's "pipes for free" comment in 2005, large ISPs have insisted that they're somehow owed more money simply because content touches their network, and that companies like Google and Netflix somehow use far more than their fair share of network resources. This is nonsensical argument pops up often when ISPs try to get Google and Netflix to subsidize their network upgrades and maintenance.

Of course in reality Netflix and Google pay plenty for bandwidth (not to mention own massive networks of their own), and consumers using these services pay for bandwidth on their end as well. In fact here in the States consumers already pay some of the highest rates among all developed countries.

ISP execs, lobbyists and paid mouthpieces increasingly try to paint Netflix (and Netflix user 33% peak network utilization) as an awful bogeyman -- when people are simply using bandwidth already well-paid for. Speaking last week at the CTAM EuroSummit in Copenhagen, Netflix CEO Reed Hastings fired back at some of this silly logic by suggesting ISPs should pay some of Netflix's content costs:
quote:
"Consumers are choosing Netflix and if we’re supposed to pay some of the cost of the network, maybe we should get some of the broadband revenue. So we say playfully to (Liberty Global CEO Mike Fries ), we’ll pay 10% of your network costs if we get 10% of broadband revenue. Or we’ll pay 10% of your network costs if you want to pay 10% of our content costs."
Hastings is of course joking because -- that idea is stupid. Equally stupid is the long-standing argument that Netflix somehow owes more money to the nation's biggest ISPs simply because those ISPs' users are choosing to use their expensive connections for streaming video.

Most recommended from 78 comments



Flyonthewall
@206.248.154.x

7 recommendations

Flyonthewall

Anon

Netflix didn't do it.

Netflix is not demanding access to customers. Customers are demanding access to Netflix. If people weren't using it, this wouldn't be an issue. It's precisely because they are that is causing traditional carriers problems, and it's just protectionism. They don't want to lose revenues, so making Netflix pay for 'upgrades' to Comcast or AT&T is just a show pony. The real issue is people want changes and they (Comcast and the like) don't want to change with the times. It's easy to claim it's overhead and data transfer fees and the like, but at the end of the day, Netflix already pays for their access, and so do ISP customers. Gouging is really easy to spot when you simplify things.
andre2
join:2005-08-24
Brookline, MA

6 recommendations

andre2

Member

Maybe ISPs should pay all content providers

You could just as easily argue that ISPs should be paying content providers, since the latter are responsible for almost all of the demand for internet access.
NOVA_UAV_Guy
Premium Member
join:2012-12-14
Purcellville, VA

1 edit

3 recommendations

NOVA_UAV_Guy

Premium Member

What I don't get...

ISPs are paid by their subscribers to deliver the content that their subscribers wish to access. The service they provide has nothing to do with what sites their subscribers go to, how much bandwidth their subscribers consumers consume, how long their subscribers use their service, how moist the last chocolate cake I ate was, or the number of marbles the average child carries with him in Naples.

It's just that simple. If an ISP can't make money (or enough money) from charging its subscribers to use its service, then it should charge its subscribers more for the service. If the competitive landscape doesn't allow that, then too bad - let the company fold. Such are the rules of capitalism when you offer an essentially homogeneous product in an industry with moderate price elasticity and somewhat reasonably low barriers to entry. (Well, I guess that last part about barriers to entry is debatable.)

No ISP should be permitted to provide preferential treatment (i.e. artificial limitations) to data requests based upon their origin or destination. Additionally, no ISP should be permitted to differentiate fees for its service based upon the amount of traffic a client uses, or the origin/destination of data packets sent by any client. While we're at it, ISPs should also not be permitted to enact or enforce data caps for any purpose. All connections (yes, even mobile 4G/LTE ones) should offer unlimited data use. If we need laws with stiff fines and penalties to enforce this, then so be it.
gaforces (banned)
United We Stand, Divided We Fall
join:2002-04-07
Santa Cruz, CA

2 recommendations

gaforces (banned)

Member

Conflicts of interests

The ISP's have their own video streaming services. There is no way Netflix can get fair treatment as they disrupt traditional content distribution. ISP's own the content now too.
Data is data and should not be categorized for financial benefit, it's one thing.

Maybe we will get it right with WWWIV, self replicating nano-fiber that eats old corroded copper lines and replaces it in situ.