Verizon Public Policy on Netflix

Wed Jul 16 22:57:56 UTC 2014

On Jul 13, 2014, at 09:09 , nanog at brettglass.com wrote:

> At 11:39 PM 7/12/2014, Steven Tardy wrote:
> 
>> How would "4U of rent" and 500W($50) electricity *not* save money?
> 
> Because, on top of that, we'd have huge bandwidth expenses. And Netflix
> would refuse to cover any of that out of the billions in fees it's collecting 
> from subscribers. We can't raise our prices (that would not only cost us
> customers but be unfair to many of them; it would be forcing the non-Netflix
> users to subsidize Netflix). We simply need Netflix to pay at least some of its
> freight.

So, to sum up, Brett, you feel that Netflix should be forced to bill their BrettGlassNet users
extra to cover what they pay to BrettGlassNet to reach the users to deliver the content the
users have requested instead of expecting you to bill the users for that yourself.

Because Netflix refuses to do this and has enough of a market presence that you aren't
succeeding so well telling your customers that they shouldn't care so much about Netflix,
you're blaming Netflix for this problem? It's a shame to see a small provider acting so much
like the big $CABLECO and $TELCO providers thinking that they have a right to extort
money from content providers to avoid billing their subscribers more accurately.

> more (it costs more to serve each one). And Netflix is particularly out of line 
> because it is insisting that we pay huge bandwidth bills for an exclusive
> connection just to it. It is also wasting our existing bandwidth by refusing to 
> allow caching.

The fact that some access provider was able to extort Netflix because they are a bigger
800# gorilla than Netflix shouldn't make you expect that you can extort Netflix in the same
way, nor does it mean that by refusing to be extorted by smaller providers, Netflix is
extorting you with their market position. In an ideal world, frankly, none of the access providers
would be allowed to double-dip like this. You should have to bill your customers for the
traffic you deliver to them. If they want more than your network can accommodate at what
they currently pay, then they should have to pay. How you sort that out with your customers
is your business. If you don't want your customers that don't use Netflix to subsidize your
customers that use Netflix, use a usage-sensitive pricing or charge a premium service of
some sort or whatever. That's between you and your customers (so long as you have
competition and your customers have choice).

> If Netflix continues on its current course, ALL ISPs -- not just rural ones,
> will eventually be forced to rebel. And it will not be pretty. 

I don't think so. I think the reality is that access providers have been trying to find ways
to force content providers to subsidize their business and avoid charging their customers
accurately for a long time and that continuing to do so is damaging to everyone involved.

> Our best hope, unless Netflix changes its ways, is for a competitor to come 
> along which has more ISP-friendly practices. Such a competitor could easily 
> destroy Netflix via better relations with ISPs... and better performance and
> lower costs due to caching at the ISP.

Your best hope is to see your competition forced to move to a pricing model that reflects the
costs of delivering what their customers demand so that you can move to a similar pricing model
without losing customers.

It's not that I'm insensitive to your situation, just that I see this as an example of one of the many
ways in which the current model has become utterly dysfunctional and attempting to perpetuate
it seems ill-advised to me.

If Netflix had a closed or limited peering policy, then I'd say "shame on Netlfix". If Netflix only peered
in an exchange point or two near corporate HQ and didn't have an extensive nationwide network, I'd
say shame on Netflix. Reality is that Netflix is in most of the major peering centers already and continues
to work aggressively to expand into more and more second-tier and third-tier peering centers. I'd say
that is Netflix paying their share. Further, for providers that aren't in peering centers Netflix is in, they
have offered a variety of alternative solutions and they pay a selection of transit providers to move the
bits to providers they can't economically connect to directly.

It seems to me that Netflix is being about as good a net citizen as is possible and I, for one, consider
them an example that should be emulated.

Access providers should have to face the reality that they are charging their customers to deliver bits
they request to them. If the price they charge is insufficient to cover their costs in doing so, then they
need to find ways to solve that problem. It is not Netflix fault that your customers want more bits from
Netflix than they want from some other content provider, that's just Netflix having a successful business.
I might have bought the idea that Netflix as a new product represents so much more than expected
bandwidth that you needed time to adjust your business model if you were making that argument 5
or more years ago. However, today, video is an expected service and Netflix is far from the only very large
provider of high-bandwidth video content.

Owen