Netflix CEO On Net Neutrality: Large ISPs Are the Problem

KindMind writes: At Wired, Netflix CEO Reed Hastings has posted his take on net neutrality. He lays the problem at the feet of the large ISPs. Hastings says, "Consider this: A single fiber-optic strand the diameter of a human hair can carry 101.7 terabits of data per second, enough to support nearly every Netflix subscriber watching content in HD at the same time. And while technology has improved and capacity has increased, costs have continued to decline. A few more shelves of equipment might be needed in the buildings that house interconnection points, but broadband itself is as limitless as its uses. We'll never realize broadband's potential if large ISPs erect a pay-to-play system that charges both the sender and receiver for the same content. ... It's worth noting that Netflix connects directly with hundreds of ISPs globally, and 99 percent of those agreements don't involve access fees. It is only a handful of the largest U.S. ISPs, which control the majority of consumer connections, demanding this toll. Why would more profitable, larger companies charge for connections and capacity that smaller companies provide for free? Because they can."

Big Data

[AlecDalek]

It's extortion plain and simple. It's never been about actual capacity. Big Data is trying to squeeze as much revenue out of us as the can.

Re:Big Data

[rahvin112]

The lie you have bought into is that destination traffic is the same as transit traffic.

The whole point of peering agreements is to stop one provider from piggybacking on another transit providers network to reduce their costs. The agreements are structured so that to reach various end points they transit the traffic as closely as possible to the destination then hand it off to the hosting network rather than hand it off at the first available point and allow it transit the other networks system.

This whole arrangement falls flat on it's face when one of those transit providers is also the major destination route for millions of customers. ISPs that provide residential service always have unbalanced traffic arrangement because the customer almost always requests more data then they send. As long as L3 and Cogent are handing this destination traffic off to Verizon at the closest possible peering point for their subscribers then Verizon shouldn't be able to request the the traffic be balanced.

The problem is that unregulated market forces have allowed monopoly providers in local markets to combine with the very limited number of Tier 1 network operators resulting in the almost immediate abuse of monopoly by the Tier 1 portion of the network leveraging the monopoly side of the residential ISP business. There is rather simple solution to this problem. Bar any ISP that offers services directly to residential customers from owning or operating long haul national networks. If Verizon was forced to separate their Tier 1 transit business from their Residential ISP business (as in either divesting the assets or separating the company into two distinct companies) the problem would be solved almost immediately.

Businesses with monopolies will abuse them, that's the whole point of regulating free markets, because without that regulation you will end almost immediately with companies abusing market position and breaking the free market. Free markets don't stay free without regulation, particularly businesses with massive capital start up costs such as residential ISPs. Without regulation you end up with Verizon's Tier 1 network business leveraging the monopoly residential ISP traffic to extract rent from competing providers. This is a rent the market would not support without the monopoly or with regulation to prevent it's abuse.

Play hardball

[felixrising]

John Oliver really said it well, explained the nature of the shake-down... these ISPs are simply being greedy and not realising that providing a quality fast connection to their subscribers is in their own interest, providing poor quality connection to services that other ISPs are providing good quality to only serves to hurt their reputation and good will with their own subscribers. If was Netflix or any of these content providers that are providing great content for the ISPs, I'd play hardball.. it'd hurt their own bottom line for a while, but if they banded together with other content providers to enforce it, they would soon have the ISPs begging.... So what would I do? Notify customers of these big ISPs that within two months they will no longer be providing the full service via that ISP.. sit back and watch the ISPs customers leave in droves.. of course, this is just turning the tables on the ISP net neutrality rules, but when the ISPs are already playing hardball and have their own man in charge of the FCC, then it's time to give them a taste of their own medicine.

Re:A little naive perhaps?

[Bengie]

Netflix's Beast box full of SSDs that can handle 50k customers streaming HD have a peak load of 150watts and takes up 2Us. 20gb of bandwidth for the cost of $20 of electricity per month is not a bad deal. Maybe the ISP would be more happy paying $40k/month of dedicated bandwidth from Level 3.

Re:I'm shocked!

[Anonymous Coward]

Yes, comrade; the only options are overwhelming, crushingly corrupt government (what we have now and you want more of apparently) and no government.

If only there was some form of limited government; a government with strictly limited powers at different levels. We could have a list of things that the head government (federal?) could do and so on and so forth down to the local level. Nah, that'd never work, get back to licking those boots.

And to answer your dumb ass question; the people of the city should decide if the streets get dug up, and who is offered the contract, not some statist managerial scum like yourself.

Re:Big Data

[mcrbids]

Their own CDN site talks about putting Netflix gear out for free. So they are basically saying they want the free ride. No one gets rack space, power, and connections for free.

I know a guy who is a network engineer at a regional ISP. They are ecstatic about hosting Netflix gear "for free" because of all the money they save! Despite the consensus here, bandwidth isn't free, it's a huge expense. And their largest use case is Netflix. By hosting the Netflix servers at the data center, they cut their network traffic by something like half.

It's a pretty big deal for them.

Re:Big Data

[bigpat]

You forgot the most important reason. They are trying to degrade a competitor's service in order to promote their own. Both Comcast and Verizon compete directly with Netflix. Last night I was able to watch Verizon channels on my tablet just fine, but Netflix wasn't working at all.