FCC commissioner accuses Netflix of creating fast lanes at the expense of competitors

“Ajit Pai of the Federal Communications Commission today accused Netflix of ‘secur[ing] ‘fast lanes’ for its own content’ at the expense of competitors and deploying proprietary caching systems in order to force Internet service providers to use nonstandard equipment,” Jon Brodkin reports for Ars Techinca. “”

“Pai, one of two Republican commissioners on the five-member commission, made the accusations in a letter to Netflix CEO Reed Hastings. The letter describes Netflix’s support for regulating ISPs as utilities in order to prevent them from charging content providers for “fast lanes” and then accuses Netflix of creating fast lanes for itself,” Brodkin reports. “Pai’s letter cites a TechCrunch article from May that quotes Hastings’ support for “strong net neutrality,” but it provides no sources for any of the accusations he made against Netflix. It reads as follows:”

Dear Mr. Hastings,

Netflix has been one of the principal advocates for subjecting Internet service providers (ISPs) to public utility regulation under Title II of the Communications Act, arguing that this step is necessary to prevent the development of so-called “fast lanes” on the Internet. “The basic argument,” you have said, “is that we’re big believers in the free and open Internet.”

For this reason, I was surprised to learn of allegations that Netflix has been working to effectively secure “fast lanes” for its own content on ISPs’ networks at the expense of its competitors.

Recent press articles report that Netflix, our nation’s largest streaming video provider, has chosen not to participate in efforts to develop open standards for streaming video. Moreover, I understand that Netflix has taken—or at least tested—measures that undermine aspects of open standards for streaming video. Specifically, I understand that Netflix has at times changed its streaming protocols where open caching is used, which impedes open caching software from correctly identifying and caching Netflix traffic. Because Netflix traffic constitutes such a substantial percentage of streaming video traffic, measures like this threaten the viability of open standards. In other words, if standards collectively agreed upon by much of the industry cannot identify and correctly route Netflix traffic, those standards ultimately are unlikely to be of much benefit to digital video consumers.

Some have suggested that Netflix has taken these actions because the company is currently installing its own proprietary caching appliances throughout ISPs’ networks as part of its Open Connect program. If ISPs were to install open caching appliances throughout their networks, all video content providers—including Netflix—could compete on a level playing field. If, however, ISPs were to install Netflix’s proprietary caching appliance instead, Netflix’s videos would run the equivalent of a 100-yard dash while its competitors’ videos would have to run a marathon.

Because these allegations raise an apparent conflict with Netflix’s advocacy for strong net neutrality regulations, I thought that it was important to give you a chance to respond to them directly.

I look forward to receiving a response to this letter by Tuesday, December 16.

Sincerely,

Ajit Pai

“During peak viewing hours, Netflix accounts for about a third of all downstream Internet traffic in North America and 9.5 percent of upstream traffic,” Brodkin reports. “Despite agreeing to pay ISPs for network connections, Netflix has asked the FCC to force ISPs to provide the connections for free. Apple and other content providers reportedly pay ISPs for interconnection as well.”

Much more, including responses to Ars’ questions from Pai’s legal advisor, in the full article here.

Related articles:
FCC hopes its rules for so-called ‘net neutrality’ survive inevitable litigation – November 22, 2014
Obama-appointed FCC chairman distances himself from Obama on so-called ‘net neutrality’ – November 12, 2014
What does so-called ‘net neutrality’ mean for Apple? – November 12, 2014
AT&T to pause fiber investment until net neutrality rules are decided – November 12, 2014
U.S. FCC plays Russian Roulette with so-called ‘net neutrality’ – November 11, 2014
U.S. House Speaker John Boehner: Republicans will continue efforts to stop misguided scheme to regulate the Internet – November 10, 2014
Tech Freedom: Obama cynically exploits confusion over Title II, misses opportunity to lead on legislative deal – November 10, 2014
Obama want FCC to regulate the Internet; Cruz calls it ‘Obamacare for the Internet’ – November 10, 2014

13 Comments

  1. This is exactly why we do not want the government screwing around with the Internet. Netflix has not created any stupid lanes on the Internet. Netflix has not impeded service to any competitors. Netflix traffic has become so large and successful that Netflix is looking more like a peer than a content provider. Service Providers are complaining about the amount of traffic and insisting that Netflix pay more, which alone will do nothing to bring the quality of Netflix’s service up.

    So Netflix places a full Netflix server in the ISP’s facility. It is now geographically close to the ISP’s end user, thereby providing much better quality of service. All that Netflix traffic isn’t beating the rest of the Internet up, which makes things better for smaller competitors actually. The ISPs are being paid to manage and house the server, which is one relatively small box.

    And the government looks at this and says Netflix is creating a fast lane. The Governmant must be kept out of this.

    1. Its clear they don’t get it.

      A business installing a server in close proximity to a geographical region you’re serving (and paying for that) is nothing new. Its just what they have to do to operate at the scale they’re at.

    2. Usually we are in agreement TM, but not this time. I can see that you do understand the issue here, so I’ve no need to explain that.

      However, I think Pai knows exactly what he’s doing, which is a total misdirection. He doesn’t (and hasn’t) supported Net Neutrality, so he’s attempting to turn the tables in an effort to make Netflix look like a hypocrite. Netflix’s Open Connect servers have nothing to do with Net Neutrality and, as you pointed out below, there is no such thing as a working “open caching” system.

      For those ISPs that won’t add an Open Connect server, Netflix was forced to choose between hurting their customers or paying up. They sided with the customers, giving them a quality product even when that meant giving in to ISP extortion. If that makes them a Net Neutrality hypocrite, then so be it.

  2. If Netflix gets what it wants and Net Neutrality is put in place then they will be treated like all other users. That will not help them provide a service.
    If Netflix are using up to a third of the bandwidth then shouldn’t they pay to ensure they can get that level of usage?

    1. Netflix offers their Open Connect program as a means of mitigating the traffic. Because those servers are placed inside an ISP’s network, it never has to go to the Internet as whole (the ISP’s network can be thought of as a giant LAN), and thus dramatically reduces congestion.

      The biggest ISPs, however, refuse to place one of these servers inside their network. That means Netflix must send the traffic over their CDN (content delivery network), which does clog the Internet as a whole (WAN traffic vs. LAN traffic). These ISPs then complain to Netflix that they are clogging the interconnects between networks (where the CDN’s network meets up with the ISP’s network). On top of that, they refuse to upgrade their side of the interconnect until Netflix pays them a fee. So what that means that you pay your ISP, then you pay Netflix, who then pays your ISP. So, effectively, you are paying your ISP twice to watch Netflix.

      Now, the government would be greatly overstepping to mandate that an ISP must place an Open Connect server inside their network. But by enforcing net neutrality, they can mandate that all traffic at those interconnects must be treated equally, and they can also mandate that the interconnect hardware be kept up to date with enough capacity to meet network demands. This mandate would apply to both sides of the interconnect.

  3. The Net Neutrality people say that NetFlix is providing the box for free, so why do they have to pay? Smaller streaming service might be able to place a box at an ISP but not afford to pay.

    Yeah well I don’t expect the same QOS out of Crumchyroll that I expect out of Netflix for one.

    Next, we all hate ISPs but there is no denying that they built the infrastructure that allows us to get the Internet today. My Time Warner bandwidth has gone from 30Mb/s down and 1.5Mb/s up to 300Mb/s down and 20Mb/s up in the last year and a half with no price increases. Netflix didn’t pay for that. The government didn’t pay for that. The ISP paid to upgrade their equipment, with just a hint of competition from AT&T.

    So like it or not, if company X is taking up 30% of that ISP’s traffic going out over the last mile in the evenings, it seems fair they should have to pay something.

    Interestingly Google said they would allow content providers like Netflix to install boxes for free, where they are acting as an ISP.

    I’ve learned to question Google’s motives though.

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