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Obama's Internet plan plays favorites, and Netflix is one of the darlings

Roslyn Layton | Dec. 2, 2014
The president seems ready to make big concessions to a company that can’t be said to be suffering without them.

When pressed, billionaire Netflix CEO Reed Hastings admitted that the amount of money at stake for Netflix was "trivial," probably 0.4% of the company's $5 billion in annual revenue. Nevertheless, Netflix persists in its campaign, even holding its own customers hostage during negotiations with ISPs. A number of independentsources cite evidence that Netflix deliberately slowed its own traffic in an attempt to gain attention from the FCC, which subsequently opened an investigation on the backbone market. Separately, an MIT/University of California-San Diego study of congestion on American backbone networks shows it is not widespread, but when congestion does occur, it frequently involves Netflix. In any case, regulators have found no evidence of abuse by ISPs on Internet transit markets.

The president's plan for supposedly ensuring a free and open Internet has different rules for different players, and Netflix would be a clear winner. But it's ludicrous to think that the company needs any sort of assistance. The broadband networks that Netflix so maligns have allowed Netflix to transform itself from a DVD-by-mail company (mail carriers are delivering a lot fewer of those iconic red envelopes than they once did) to the world's leading on-demand streaming video service with more customers than any cable provider. As Netflix boasts of doubling its operating income and a 40% contribution margin, it is hardly in need of regulatory favors, and it's certainly not being subjected to anticompetitive practices from ISPs. The explosion of Internet content proves the success of limited regulation and shows why the FCC should reject government overreach and Netflix's self-serving crusade.

Netflix, with its exclusive offerings and growing customer base, could withhold content from ISPs' networks as a bargaining chip. And being one of the president's darlings, it could get away with it. Perhaps red is the new blackmail.

 

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